Sample Essay
The gains that are depicted per year for the company in terms of the cash savings on the cost of sales were recorded at 1200k for 2008, 1000k for 2009, 800k for 2010, 600k for 2011 and 300k for 2012. These cash savings are direct contributions into the income for the company having a resultant exact increase in the income for the particular period of cash savings. However this has to be kept in account that the corporate tax is also applied of the income of the company and is due to increase with the increasing income. When not taking the tax into considering the retained earnings for the period for 2008 came at 1740k and the retained earning that would be recorded at the yearend accounts to be 3060k for the Excel Limited Company.
While the returned earnings are considerable compared to the formally budgeted 1800K of retained earnings in the year 2008 and the year end recorded retained earnings of 2430K the investment does not provide significant savings in terms of benefits and cost efficiency for the company in the long term. The following years depict that the savings that are brought on by the investment decrease at an increasing rate while in order to source the funding of the machinery the company will have to take on loans from banks and financial institutions. The loan at the mentioned 10% requite would put heavy burden on the company in terms of interest payment and the liabilities. This would increase the gearing of the company to 1.01 which is very high as compared to the industry averages. As a result it is not recommended that the company invest in this particular machinery and then source the investment by a bank loan.
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