Investing At a recent trade fair that you attended, you were impressed with a new machine, Windwhistle model 230E, that can double the production capacity of your flagship product, Cropmaster 18 Fertiliser. The machine requires a capital outlay of $500,000 and will have a residual value of $25,000 at the end of its six-year useful life. It is expected that the new machine will generate the following cash flows:

 
Analysis - Investing Decision: Should the capital expenditure proposal to purchase a new machine, Windwhistle model 230E that can double the production capacity of your flagship product, Cropmaster 18 Fertiliser be accepted?

Transcribed Image Text:

0 $(500,000) Initial Inv. 1 2 3 185,000 160,000 145,000 90,000 Investment decision technique 4 Payback Period (PP) Net Present Value (NPV) Internal Rate of Return (IRR) 5 90,000 6 You have obtained information on the payback Period policy of an investment set by management of Sheffield Limited and the other information for investment in the new machine, Windwhistle Model 230E as below: 90,000 25,000 Decision criteria set by management Not more than 3 years Positive NPV Not less than 9.0% Outcome for investment in Windwhistle model 230E 3.11 years $92,276.33 16.07% Activate Win Go to Settings to 0 $(500,000) Initial Inv. 1 2 3 185,000 160,000 145,000 90,000 Investment decision technique 4 Payback Period (PP) Net Present Value (NPV) Internal Rate of Return (IRR) 5 90,000 6 You have obtained information on the payback Period policy of an investment set by management of Sheffield Limited and the other information for investment in the new machine, Windwhistle Model 230E as below: 90,000 25,000 Decision criteria set by management Not more than 3 years Positive NPV Not less than 9.0% Outcome for investment in Windwhistle model 230E 3.11 years $92,276.33 16.07% Activate Win Go to Settings to

Answer rating: 100% (QA)

To make an investment decision regarding the purchase of the Windwhistle model 230E machine we can analyze the provided information using the three in... View the full answer