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7) The company CANO-MAT use a semi-automatic machine for filling cans on their production line. They are however considering investing in an automatic machine. The
7) The company CANO-MAT use a semi-automatic machine for filling cans on their production line. They are however considering investing in an automatic machine. The following information is available: Initial investment Semi-automatic HS1 Fully-automatic HA2 825 000 kr Salary (cost) per year 390 000 kr 180 000 kr Other running costs per 110 000 kr 45 000 kr year Economic life-span 6 r Residual (Scrap) value 12 000 kr Rate of return 20% a) Calculate the annual cash-flows. 2p b) Calculate the payback time of HA2. (Investment/cash-flow = time) 1p c) Use the Net present value method and decide if the company should invest in HA2
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