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A. Quartz Ltd is considering an investment to buy a Jewellery-making machine named Alpha. The following data are related to this investment Project Alpha $100,000
A. Quartz Ltd is considering an investment to buy a Jewellery-making machine named Alpha. The following data are related to this investment Project Alpha $100,000 Investment cost (cash outflow) Expected annual net profit (loss) . Year 1 . Year 2 ($1,000) $2,000 $29,000 $7,000 . Year 3 Estimated residual value at the end of year 3 The company has a required rate of return of 10% and employs the straight-line depreciation method for all non-current assets when calculating net profit. For an Investment worth less than $200,000, its required payback period is not more than two (2) years. (TASKI: (a) Analyse the investment using the following methods: (0) Accounting rate of return (H) Net present value (use three (3) decimal places for the PV factors) (ii) Payback period (10 marks) (b) Based on your calculation in (a), write a short report on the analysis of the investment. You are also required to suggest to the company if they should buy the machine or not. (5 marks) B. The net present value (NPV) method is a technique evaluating whether or not to undertake a capital expenditure proposal [TASK] Explain three (3) situations/reasons where a business would choose not to invest in a project which is expected to generate a positive NPV. (10 marks) Iar to market
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