(Memorandum Required) KT Enterprises Is Considering the Purchase of a Flexible Manufacturing

question 9

Essay

(Memorandum required)
KT Enterprises is considering the purchase of a flexible manufacturing system. The savings associated with the system are estimated to be as follows:
The system will cost £250,000 and will last seven years. The system would have a salvage value of £30,000 at the end of seven years. The company's cost of capital is 8 percent.
Required:
Prepare a memorandum to management with your recommendation regarding whether KT Enterprises should purchase the flexible manufacturing system. Include a discussion of qualitative factors that might influence management's decision. Include your supporting calculations (including NPV analysis).

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Definitions:

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A mutual agreement between two parties where each promises to perform an act in exchange for the other's act.

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