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Ali Ali Ltd is into flower production. The variable cost and fixed cost are N5 and 50k respectively. The firm is proposing the purchase of
Ali Ali Ltd is into flower production. The variable cost and fixed cost are N5 and 50k respectively. The firm is proposing the purchase of a new machine that cost N440,000.00. The variable cost per flower is estimated at N2.50. The rent for the new machine is N77,500.00 per annum. The expected useful life of the new machine is 4 years and has no salvage value. The sale estimate for the company is 75,000 bags per annum. If Ali Ali Nig Ltd cost of capital is 12% per annum. After the preliminary calculation, the constant cash flow is equal to N110,000.00 for the period of four years You are required to compute the Net Present Value with Microsoft Excel and advice the management of the company whether the new machine to be purchased or not
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