You are required to present answers in a single report format of a case study where you are the financial manager who must make an investment decision. All questions are based on the concepts in your prescribed textbook and you need to use extra resources when you define the methods to solve the problems. The case tests your understanding of the capital budgeting techniques and the qualitative aspects of risk and return decision making.

The Case Study Making Ford Firm Investment Decision

Ford is a large cars makers firm considering replacing one of its painting machine with either of two new machines, machine A or machine B. Machine A is highly automated, computer- controlled machine; machine B is a less expensive machine that uses standard technology. To analyse these alternatives, Simon Ray, a financial analyst, prepared estimates of the initial investment and incremental (relevant) after-tax net cash flows associated with each machine. These are showing in the following table: