XYZ Ltd is considering purchasing a new machine, and the relevant facts concerning two possible choices are
Question:
XYZ Ltd is considering purchasing a new machine, and the relevant facts concerning two possible choices are as follows:
The company’s cost of capital is 10%.
Required
Calculate, for each machine, the payback period, the net present value and the profitability index. State, with reasons, which machine you would recommend.
Transcribed Image Text:
Machine A Machine B Capital expenditure required Estimated life in years £65,000 £60,000 4 4 Residual value nil nil Cash flow after taxation each year £25,000 £24,000
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Related Book For
Financial And Management Accounting An Introduction
ISBN: 9781292244419
8th Edition
Authors: Pauline Weetman
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