Herbs Pty Ltd is considering investing in a new herb packaging machine. The machine is estimated to
Question:
Herbs Pty Ltd is considering investing in a new herb packaging machine. The machine is estimated to cost $80,000 which can last for 7 years before it becomes too costly to maintain and can be sold for scrap at $7,000. The project is estimated to bring in additional $20,000 cash inflow and incur $12,000 in additional expenses related to the running the machine in the first year. The company expects there will be an annual sales growth of 6% from year 2 onward. Expenses are also expected to grow by 3% annually from the second year of the operation.
The company plans to fund the purchase of the new machine using a bank loan with an interest rate of 9%.
How long is the payback period for this project? ----------- years.
What is the NPV for this project? $ ------------------.
What is the IRR for this project?----------------- %.
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey