ABC Ltd. is considering introduction of a new product. The company has two options to choose from. The first product (X) has the following information: ii) iii) Profit after tax of GH3,000 will be made each year for the next five years. This profit was arrived at after deducting annual depreciation of GH2,000. The cost of the plant for the production of product (X) is GH13,500 The second product (Y) has the following information. i) Profit after tax and depreciation are as following: Years Profit (GHC) 1 4,500 2 5,200 3 7,900 7,000 2,500 4 5 ii). It will cost the company GH20,500 to acquire the plant for the production of product (Y). You are to evaluate the two products and advice ABC Ltd. which product should be produced if the cost of capital is 15% based on: i). Pay Back Period ii). Net Present Value

Ltd. is considering introduction of a new product. The company has two options to choose from. The first product (X) has the following information: i) Profit after tax of GH/3,000 will be made each year for the next five years. ii) This profit was arrived at after deducting annual depreciation of GH/2,000. iii) The cost of the plant for the production of product (X) is GH/13,500 The second product (Y) has the following information. i) Profit after tax and depreciation are as following: ii). It will cost the company GH $20,500 to acquire the plant for the production of product (Y). You are to evaluate the two products and advice ABC Ltd. which product should be produced if the cost of capital is 15% based on: i). Pay Back Period ii). Net Present Value (20 marks)