Question
BioTech Ltd is looking to expand its production capacity by purchasing new equipment for $800,000. The equipment has a useful life of 8 years and
BioTech Ltd is looking to expand its production capacity by purchasing new equipment for $800,000. The equipment has a useful life of 8 years and will be depreciated using the double-declining balance method. Expected annual cash inflows from the equipment are $150,000.
Requirements:
- Calculate the annual depreciation for each year.
- Determine the payback period.
- Calculate the NPV assuming a discount rate of 10%.
- Assess the IRR of the investment.
- Should BioTech Ltd purchase the equipment?
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Financial Management for Public Health and Not for Profit Organizations
Authors: Steven A. Finkler, Thad Calabrese
4th edition
133060411, 132805669, 9780133060416, 978-0132805667
