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Instructions:
• This assignment carries 15% of the grade. • You can purchase the case, ‘Magic timber and steel: Investment evaluation with Net Present Value’ search (9B16N010) (you can choose digital download) at https://www.iveycases.com. • Update: The cost of new machine Delta is 135,000 instead of 140,000 given in the case.
Report Submission Instruction: • Maximum 4 pages excluding Reference/Appendix. You may consider using Refernce/Appendix section to include your research references, calculations, relevant graphs, charts, illustrations, and tables.
• Report due date and time: 6 June 2021 23:59 Hour Pacific Standard Time • Report must be submitted in Week 9 Turn-it-in link “Assignment 2, Due 6 th June – Submit here”. • A separate link ‘Assignment 2 – Submit Excel File here (if any)’ will be provided if you want to submit your excel file, if any available. Report submission by email will not be accepted. • Please include the statement with your signature in your paper: “I agree that the work in this assignment is my own work and that I have given credit to all sources of information used in my assignment by including citations and references in the APA format. I acknowledge that I am expected to exercise the utmost academic integrity in all work submitted for this course. SIGNATURE: Your name” Report Expectation: You will be reading the case, research relevant facts, perform analysis, and document your findings, analysis, and recommendation in a written report to John Davidson to assist in the decision of whether to buy the new machine or maintaining the existing one.
You may consider the following guided questions to prepare your report. If you have made assumption(s) as part of the case analysis, please include them in the report. • Using NPV analysis, should Magic Timber and Steel (Magic) purchase the new Delta finishing machine? • What other quantitative and/or qualitative factors (see below) need to be taken into consideration? • Sensitivity analysis (e.g., different discount rates, different selling prices, change in maintenance cost) • You may assume discount rate as 11% and tax rate as 30%. Cash Flows: Matrix: • Salvage value, Repair, Maintenance, Scheduled service, Machine Sales Delta: • Machine investment, Labour savings, Electricity savings, Maintenance, Salvage value, Profit/Loss from sale Non-Cash Flows: Matrix: • Depreciation (given in case) Delta: • Depreciation (10% per year of cost $135,000) Tax Impact relevant Cash Flows: Which of the above cash flows and non-cash flows could impact the cash flow for tax saving/payment? • Savings (+ taxable income), Costs (- taxable income), Depreciation (Matrix, Delta), Profit/Loss from Sale Cash Flows for NPV: Which of the above cash flows (including tax impact relevant cash flows) are relevant for purchase of Delta decision?
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