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Calculate the Accounting Rate of Return, Payback and Net present value for each alternatives below, please provide computations and formulas used. Hurdle rate of 10%
Calculate the Accounting Rate of Return, Payback and Net present value for each alternatives below, please provide computations and formulas used.
Hurdle rate of 10%
| New Machine - 10 year expected useful life | |||
| Alternative A | Alternative B | Alternative C | |
| Cost | 2,000,000 | 2,500,000 | 2,250,000 |
| Setup costs | 25000 | 20000 | 50000 |
| Training costs | 15000 | 19000 | 0 |
| Maintenance | |||
| Years, 3, 5, 7, & 9 | 45000 | ||
| Years 3, 6, & 9 | 60000 | ||
| Annual Maintenance Contract | 7500 | ||
| Refitting Costs | |||
| Year 4 and 8 | 40000 | ||
| Year 3, 6, and 9 | 20000 | ||
| None required, provided free by seller | 0 | ||
| Tax Savings from Depreciation (tax rate 20%) | |||
| Each year for 10 years | 40000 | 50000 | 45000 |
| Annual Cash savings from increased productivity | |||
| Years 1-4 | 100000 | 150000 | 200000 |
| Years 5 - 8 | 75,000 | 90000 | 40000 |
| Years 9 and 10 | 5000 | 14000 | 3000 |
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