IDISIGN incorporation is considering the purchase of a new packaging machine to have a more creative...
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IDISIGN incorporation is considering the purchase of a new packaging machine to have a more creative and innovative packaging design. The manager think that an innovative packaging design will have a positive impact on sales and the purchasing experience for the customer. -The initial outlay of the machine is 12,500,000 -Each year the operation inflows are equal to AED 5,000,000 -During the third year the equipment will require maintenance with the cost of 1,000,000 -The required rate of return on this project is 10 percent. -One of the objectives is to cover the initial outlay in 3 years. Based on the above information, 1.Calculate the annual net cash flow. 1 Mark Year 0 1 2 3 4 5 Cash Flows 2. Based on each of the following capital budgeting criteria, recommend if the firm should conduct the project or not. Justify your answer. (Show all the steps of your work) 9 Marks Payback 1 Mark Years Cash flows IDISIGN incorporation is considering the purchase of a new packaging machine to have a more creative and innovative packaging design. The manager think that an innovative packaging design will have a positive impact on sales and the purchasing experience for the customer. -The initial outlay of the machine is 12,500,000 -Each year the operation inflows are equal to AED 5,000,000 -During the third year the equipment will require maintenance with the cost of 1,000,000 -The required rate of return on this project is 10 percent. -One of the objectives is to cover the initial outlay in 3 years. Based on the above information, 1.Calculate the annual net cash flow. 1 Mark Year 0 1 2 3 4 5 Cash Flows 2. Based on each of the following capital budgeting criteria, recommend if the firm should conduct the project or not. Justify your answer. (Show all the steps of your work) 9 Marks Payback 1 Mark Years Cash flows
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