ABC Inc. is planning to buy machine A which will cost $ 10 million. The expected...
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ABC Inc. is planning to buy machine A which will cost $ 10 million. The expected life of the machine is 5 years. The salvage value of the machine is nil. ABC Inc. is expecting cash-flow of $ 5 million for the first two years, $ 3 million for the next 2 years & $2 million in 5th year. Operating expense is $ 1 million for every year. Discounting rate is 10%. (Assumption: No tax) Formulate Capital Budgeting using the following techniques: a) Payback period b) Discounted payback period c) Net Present Value d) Return on Investment e) Profitability Index ABC Inc. is planning to buy machine A which will cost $ 10 million. The expected life of the machine is 5 years. The salvage value of the machine is nil. ABC Inc. is expecting cash-flow of $ 5 million for the first two years, $ 3 million for the next 2 years & $2 million in 5th year. Operating expense is $ 1 million for every year. Discounting rate is 10%. (Assumption: No tax) Formulate Capital Budgeting using the following techniques: a) Payback period b) Discounted payback period c) Net Present Value d) Return on Investment e) Profitability Index
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Answer rating: 100% (QA)
a Payback period The payback period is the amount of time it takes for the initial investment to be recovered through the cash inflows generated by th... View the full answer
Related Book For
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
Posted Date:
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