Chocolate Daydreams Ltd produces chocolates and is evaluating the purchase of a new machine that will cost

Question:

Chocolate Daydreams Ltd produces chocolates and is evaluating the purchase of a new machine that will cost $1060000 and have no residual value. Annual net cash inflows (including tax payments) for each of the next 10 years are expected to be $190000. The average annual profit is expected to be $95250. The company has a cost of capital of 12%.

Required

A. Calculate the payback period.

B. Calculate the net present value.

C. Calculate the return on average investment.

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... 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...

Fantastic news! We've Found the answer you've been seeking!