Help the aged Ltd is considering which of two machines to buy to make a new...
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Help the aged Ltd is considering which of two machines to buy to make a new product. The market for the product looks promising and the company is confident that it can sell the entire product it can make at $20 per unit. The extra variable manufacturing cost per unit is $10 regardless of which machine is used. Both machines have an expected useful life to of 5 years. The machines: Machine Y Will cost $19,000 to buy and install. It will have no scrap value at the end of its life. Machine Z Will cost $26,000 to buy and install. It can be sold for $1,000 at the end of the project period. Predicted production Year 1 2 3 4 5 Units produced y Z 800 1,200 500 400 100 1,000 1,000 1,200 900 200 Required: Appraise both investments using the 4 main methods of investment appraisal. The appropriate discount rate is 10%. Help the aged Ltd is considering which of two machines to buy to make a new product. The market for the product looks promising and the company is confident that it can sell the entire product it can make at $20 per unit. The extra variable manufacturing cost per unit is $10 regardless of which machine is used. Both machines have an expected useful life to of 5 years. The machines: Machine Y Will cost $19,000 to buy and install. It will have no scrap value at the end of its life. Machine Z Will cost $26,000 to buy and install. It can be sold for $1,000 at the end of the project period. Predicted production Year 1 2 3 4 5 Units produced y Z 800 1,200 500 400 100 1,000 1,000 1,200 900 200 Required: Appraise both investments using the 4 main methods of investment appraisal. The appropriate discount rate is 10%.
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Net Present Value NPV Machine Y NPV 20 10 x 100011 1000112 1000113 1000114 10... View the full answer
Related Book For
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston
Posted Date:
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