SQU LLC is considering purchasing the following new machines which relevant data is presented below. Cost...

 

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SQU LLC is considering purchasing the following new machines which relevant data is presented below. Cost Salvage value Tax Rate Albana Albanu 580,000 840,000 Life Span 5,000 2,000 Yearly Cost Savings Discount Rate 25% Albana Albanu 8 10 185,000 195,000 10% (a) Evaluate the above capital expenditure proposal using the three different methods of Net Present (10 marks) Value, the Internal Rate of Return and the Payback Period. (Note: You are required to clearly indicate the appropriate decision and assume straight- line depreciation method) (b) Numerical analysis based on the above calculation methods forms only a part of the capital (10 marks) budgeting strategy. Do you agree? Explain. (c) Given the results in (a) above, do you agree that the IRR method is superior to the NPV method? (5 marks) Explain. SQU LLC is considering purchasing the following new machines which relevant data is presented below. Cost Salvage value Tax Rate Albana Albanu 580,000 840,000 Life Span 5,000 2,000 Yearly Cost Savings Discount Rate 25% Albana Albanu 8 10 185,000 195,000 10% (a) Evaluate the above capital expenditure proposal using the three different methods of Net Present (10 marks) Value, the Internal Rate of Return and the Payback Period. (Note: You are required to clearly indicate the appropriate decision and assume straight- line depreciation method) (b) Numerical analysis based on the above calculation methods forms only a part of the capital (10 marks) budgeting strategy. Do you agree? Explain. (c) Given the results in (a) above, do you agree that the IRR method is superior to the NPV method? (5 marks) Explain.

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Answer a Albana Albanu Net Present Value 587474 210995 Internal Rate of Return 285751 179675 Payback Period 395 Yrs 592 Yrs SQU LLC should consider in ... View the full answer