21. A company is contemplating to purchase a new machine. Two machines A and B are available,...
Question:
21. A company is contemplating to purchase a new machine. Two machines A and B are available, each costing `5 Lakh. In comparing the profitability of the machines, a discounting rate of 10% is to be used and machine is to be written off in five years by straight line method of depreciation with nil residual value. Cash inflows after tax are expected as follows: (` in lakhs)
Year Machine A Machine B 1 1.5 0.5 2 2.0 1.5 3 2.5 2.0 4 1.5 3.0 5 1.0 2.0 Indicate which machine would be profitable using the following methods of ranking investment proposals: (i) Payback Method; (ii) NPV Method (III) PI Method and
(iv) Average Rate of Return method. [C.S. Final June 1998]
Step by Step Answer:
Financial Management
ISBN: 9789352605606
1st Edition
Authors: Swapan Sarkar, Bappaditya Biswas, Samyabrata Das, Ashish Kumar Sana