2023 Beautifully Fabulous Beauty Salon manufactures two products Beauty Gloss and Cocooning Spray Beauty Gloss is of fairly recent origin having | Assignments Online

Beautifully Fabulous Beauty Salon manufactures two products, Beauty Gloss and Cocooning Spray. Beauty Gloss is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Cocooning Spray. Beauty Gloss is produced on an automated production line. Due to the forecast of economic growth, the BFBS is considering purchasing a new machine costing $40,000. The machine will have 10 years of useful life and a salvage value of $6,000. Using the straight-line depreciation method, the original machine cost will be depreciated over 10 years not considering the salvage value in the calculation of the depreciation. The new machine will generate $15,000 in annual net cash flows throughout its useful life (ordinary annuity). To maintain the machine it will require additional working capital of $3,000, which would be released at the end of the useful life. The company’s tax rate is 40% and its discount rate is 10%. Present value tables can be accessed at the following link: http://highered.mcgraw-hill.com/sites/0072994029/student_view0/present_and_future_value_tables.html
LENGTH 2-3 pages typed and double spaced
The following items will be assessed in particular:
1.
Prepare a NPV table based on the information given and using the table BFBS Cost Analysis format. The student may use Periasamy, P. (2010). Textbook of Financial Cost and Management Accounting, Global Media 2010 (read chaps 27-29) as a review source. 
1.
Analyze the data in the NPV table.
2.
Discuss the decision that should be made concerning the investment in the new machine. 
As an example, review the spreadsheet below:
Cash

Tax Effect

After-Tax

11%
PV of
Description
Year(s)
Flow
30%
Cash flows
Factor
Cash Flow
New machine cost

Now

($500,000)
-500,000

1.0000

($500,000)
Controls and software

Now

-80,000
-80,000

1.0000

-80,000
Salvage of old machine

Now

12,000

0.70

8,400

1.0000

8,400
New annual cost savings

1 to 12

78,500

0.70

54,950

6.4924

356,755

Depreciation tax shield

1 to 12

-45,000

0.30

-13,500

6.4924

-87647.4

Salvage value of machine

12

20,000

0.70

14,000

0.2858

4,002
Net present value
($298,490.4)