LJH plc is planning to buy a machine which will cost 900,000 and which is expected to

Question:

LJH plc is planning to buy a machine which will cost £900,000 and which is expected to generate new cash sales of £600,000 per year. The expected useful life of the machine will be eight years, at the end of which it will have a scrap value of £100,000. Annual costs are expected to be £400,000 per year. LJH plc has a of 11 per cent.
(a) Calculate the payback period, return on capital employed, and of the proposed investment.
(b) Discuss the reasons why is preferred by academics to other methods of evaluating investment projects.
Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...