Waseem Textile Mills is considering the purchase of a new machine to enhance productivity and ensure timely
Question:
Waseem Textile Mills is considering the purchase of a new machine to enhance productivity and ensure timely completion of export orders. The machine will cost Rs (machine cost = 1811302), plus Rs. 500,000 for shipping and installation cost. Financial Analyst forecasts that this machine will generate revenue by Rs. 1,000,000 for each of the next 5 years. The interest rate is 12% at which the firm can finance the machine through bank financing.
Compute the following and also decide whether this project should be accepted based on computations for each of the following:
a. Find the payback period. Firm has a cut-off period of 3 years to recover all investment cost from the project.
b. Find discounted payback period. Firm has a cut-off period of 3 years to recover all investment cost from the project.
c. Find net present value.
d. Find profitability index.
International Accounting
ISBN: 978-1260466539
5th edition
Authors: Timothy Doupnik, Mark Finn, Giorgio Gotti, Hector Perera