Romeo Corporation is producing goods mostly by manual labour and considering replacing it by a machine....

 

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Romeo Corporation is producing goods mostly by manual labour and considering replacing it by a machine. There are two alternative models for the machine: Machine Alpha and Machine Beta. Information regarding the two machines is given below: Initial cost (SEK) Estimated life (year) Residual value (SEK) Estimated cash inflows (SEK): 1st year 2nd 3rd 4th 5th year year year year Machine Alpha 180 000 4 0 70 000 80 000 90 000 90 000 Required: a. Calculate the payback period for Machine Alpha. b. Calculate the payback period for Machine Beta. c. Which machine will be selected? Machine Beta 360 000 5 0 90 000 110 000 120 000 120 000 100 000 Romeo Corporation is producing goods mostly by manual labour and considering replacing it by a machine. There are two alternative models for the machine: Machine Alpha and Machine Beta. Information regarding the two machines is given below: Initial cost (SEK) Estimated life (year) Residual value (SEK) Estimated cash inflows (SEK): 1st year 2nd 3rd 4th 5th year year year year Machine Alpha 180 000 4 0 70 000 80 000 90 000 90 000 Required: a. Calculate the payback period for Machine Alpha. b. Calculate the payback period for Machine Beta. c. Which machine will be selected? Machine Beta 360 000 5 0 90 000 110 000 120 000 120 000 100 000

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To calculate the payback period for Machine Alpha and Machine Beta we need to determine the number o... View the full answer