Question
A company is considering the purchase of a machine whose life is 5 years. The machines A and B are available for $80,000 each. Evaluate
A company is considering the purchase of a machine whose life is 5 years. The machines A and B are available for $80,000 each. Evaluate the two alternatives according to (a). Payback Method, (b). Net Present Value Method (A discount rate of 11% is to be used) (Kindly mention detailed steps)
Cash earnings after taxation are as:
| Year | Machine A | Machine B |
| $ | $ | |
| 1 | 24,000 | 8,000 |
| 2 | 32,000 | 24,000 |
| 3 | 40,000 | 32,000 |
| 4 | 24,000 | 48,000 |
| 5 | 16,000 | 32,000 |
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Fundamentals of Multinational Finance
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman
5th edition
205989756, 978-0205989751
