Infinite Ltd is considering two investment options. The first option involves an upgrade to an existing food

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Infinite Ltd is considering two investment options. The first option involves an upgrade to an existing food processing facility and the second option building a new food processing facility. Infinite can only undertake one of the two options so is evaluating which option they should choose. Infinite uses the straight-line method of depreciation and the residual value for both Options A and B is expected to be \(\$ 125000\) at the end of five years. Infinite's required rate of return on investments is 20 per cent.

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Required:
a Calculate the payback period for options A and B.
b Calculate the accounting rate of return for options A and B.
c Calculate the NPV for options A and B.
d Make a recommendation on which option Aussie should invest in based on your calculations.

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Related Book For  book-img-for-question

Accounting Information For Business Decisions

ISBN: 9780170253703

2nd Edition

Authors: Billie Cunningham, Loren A. Nikolai, John Bazley, Marie Kavanagh, Geoff Slaughter, Sharelle Simmons

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