CAPITAL INVESTMENT APPRAISAL -------------------------------------------------------------------------------------------------------- Caf Vert's 'Air-Conditioning' Project Appraisal Simone Marrer is also considering purchasing a new air-conditioning system with a view to reducing the aroma of cooking from the kitchen - customers are increasingly remarking on [ie complaining about!] this. Simone has obtained the following information relating to two of the leading catering establishment systems on the market - the BreatheKleen and the Circulair: Purchase cost Estimated useful life Overhaul costs Estimated residual value Annual expenses: - Maintenance contract Annual savings: - Energy - Repairs BreatheKleen Circulair 55,000 10 years 2,000 in Year 5 5,000 47,000 10 years 3,000 in Year 6 7,000 2,500 4,000 9,000 3,000 8,000 4,000 Using the data provided, and assuming a cost of capital of 10%, calculate the Payback, ARR and NPV for each of the two air-conditioning systems under consideration. Based on your calculations, advise Simone as to which of the two machines to select - but also suggest what additional information she should consider before making her final choice. PAYBACK: BreatheKleen Circulair CAPITAL INVESTMENT APPRAISAL -------------------------------------------------------------------------------------------------------- Caf Vert's 'Air-Conditioning' Project Appraisal ARR: BreatheKleen Circulair CAPITAL INVESTMENT APPRAISAL -------------------------------------------------------------------------------------------------------- Caf Vert's 'Air-Conditioning' Project Appraisal NPV