Apply Net Present Value for both projects with proper working.

Calculate Payback period for both projects with proper working.

Abdulla Inc is planning to start a new manufacturing plant. To make the distribution process smoother, the Inc. is planning to have its own within-plant distribution system for its new roasting, grinding and packaging processes. The company invited various quotations from various suppliers to make its within plant distribution system smoother and finally shortlisted two alternatives conveyor to choose the one between them. These two alternatives are (i) a conveyor system with a high initial outlay but low annual operating costs and (ii) some forklift trucks, which cost less but have considerably higher operating costs. The management of the company has already taken the decision to construct the plant. Management has also understood that the choice of distribution system will have zero effect on the overall revenues of the project. The cost of capital for the plant is 8 percent, and the projects expected net costs are listed below

Initial Outlay Year 1 2 3 Conveyor System Forklift Trucks2 -$340,000 -$250,000 Operating Cash inflows 583,000 $44,000 $67,000 $64,000 $34,000 $87,000 $78,000 $104,000 $93,000 $128,000 $104,000 $145.000