Cherry Bakery planning to buy a new machine to improve their production. After some research done, the
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Question:
Cherry Bakery planning to buy a new machine to improve their production. After some research done, the list out two machines model that suitable. As financial executive of the firm, assist them in choosing the best machine.
Below is the information on the machines and given the cost of capital is 9 percent.
Calculate the following for both machines:
| ZANOLLI | BONGARD | |
| INITIAL INVESTMENT | RM40,000 | RM40,000 |
| YEAR | EXPECTED CASH FLOW | |
| 1 | RM15,000 | RM10,000 |
| 2 | RM15,000 | RM16,000 |
| 3 | RM15,000 | RM15,000 |
| 4 | RM15,000 | RM15,000 |
Required
(a) Payback period
(b) Net Present Value
(c) Profitability Index
(d) Based on answer above, determine which machine that Cherry Bakery should choose.
Expert Answer:
a Payback period The payback period for Zanolli is calculated as follows Payback period Initial inve... View the full answer
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