capital budgeting

A factory operates a small canteen but its annual operation has consistently shown a loss: Sales RM100,000 Cost of food and beverage RM50,000 Salaries RM60,000 Net loss RM10,000 The company is considering buying automatic food and drink vending machines at a cost of RM24000 less RM5000, trade in on the existing dining room equipment. The estimated useful life of the vending machines is 10 years with no scrap (residual) value. The vending machine company would supply the food, drink and serviced at its own expense. They are giving 10% of gross sales to the factory. It is estimated that sales with the vending machines will increase by 50% but price has to be 50% less. The factory has to employ one attendant in the dining area ( that is where the vending machines are going to be allocated) at annual cost of RM6300. Termination payments for all other canteen staff are RM8000. The required rate of return is set at 20%. How long is the payback period Calculate the ARR Calculate the NPV Calculate the IRR (hint: try r between 0.30,0.35,0.40,0.45) Should the project of replacing the canteen with vending machines be accepted? A factory operates a small canteen but its annual operation has consistently shown a loss: Sales RM100,000 Cost of food and beverage RM50,000 Salaries RM60,000 Net loss RM10,000 The company is considering buying automatic food and drink vending machines at a cost of RM24000 less RM5000, trade in on the existing dining room equipment. The estimated useful life of the vending machines is 10 years with no scrap (residual) value. The vending machine company would supply the food, drink and serviced at its own expense. They are giving 10% of gross sales to the factory. It is estimated that sales with the vending machines will increase by 50% but price has to be 50% less. The factory has to employ one attendant in the dining area ( that is where the vending machines are going to be allocated) at annual cost of RM6300. Termination payments for all other canteen staff are RM8000. The required rate of return is set at 20%. How long is the payback period Calculate the ARR Calculate the NPV Calculate the IRR (hint: try r between 0.30,0.35,0.40,0.45) Should the project of replacing the canteen with vending machines be accepted