Mithu PLC, is a diversified business entity currently in the process of entering into the food...

  

Transcribed Image Text:

Mithu PLC, is a diversified business entity currently in the process of entering into the food manufacturing sector. The company is expecting your support for evaluating the viability of using an automated machine for producing proposed food items. There are two (02) machines under consideration of the management. The initial investment cost of each machine would be Rs.10 million. The estimated economic useful lifetime for the machine I would be six (06) years and that of machine II would be eight (08) years. The estimated annual net cash flows of each machine are given below. Year Machine I (Rs.000) Machine II (Rs.000) 1 1,500 3,000 2 3 4 5 6 7 8 3,600 3,500 4,100 1,300 2,800 The company's cost of capital is 11%. Ignore taxation. You are required to; 2,000 3,500 5,000 2,000 2,500 1,000 1,000 Advise the company on selecting a suitable machine to be purchased. Your answer should be supported with relevant calculations. (10 Marks) Mithu PLC, is a diversified business entity currently in the process of entering into the food manufacturing sector. The company is expecting your support for evaluating the viability of using an automated machine for producing proposed food items. There are two (02) machines under consideration of the management. The initial investment cost of each machine would be Rs.10 million. The estimated economic useful lifetime for the machine I would be six (06) years and that of machine II would be eight (08) years. The estimated annual net cash flows of each machine are given below. Year Machine I (Rs.000) Machine II (Rs.000) 1 1,500 3,000 2 3 4 5 6 7 8 3,600 3,500 4,100 1,300 2,800 The company's cost of capital is 11%. Ignore taxation. You are required to; 2,000 3,500 5,000 2,000 2,500 1,000 1,000 Advise the company on selecting a suitable machine to be purchased. Your answer should be supported with relevant calculations. (10 Marks)