Question
Dawson, owner of a small enterprise is considering thepurchasea new machine. Machines Dell and Leno are available, They have initial invest of $80,000 each and
Dawson, owner of a small enterprise is considering thepurchasea new machine. Machines Dell and Leno are available, They have initial invest of $80,000 each and thediscount rateis 10%. The following information relate to the machines that are available
| Year | Machine Dell | Machine Leno |
| $ | $ | |
| 1 | 24,000 | 8,000 |
| 2 | 32,000 | 24,000 |
| 3 | 40,000 | 32,000 |
| 4 | 24,000 | 48,000 |
| 5 | 16,000 | 32,000 |
Required:
Evaluate the two alternatives using the following:
(ai) payback method
(aii) Which project should be chosen based on payback method? 5 marks
(b) net present value method 12 marks
c) Profitability Index 4 marks
d) If the projects are independent, which project should Dawson choose?Dawson, owner of a small enterprise is considering thepurchasea new machine. Machines Dell and Leno are available, They have initial invest of $80,000 each and thediscount rateis 10%. The following information relate to the machines that are available
| Year | Machine Dell | Machine Leno |
| $ | $ | |
| 1 | 24,000 | 8,000 |
| 2 | 32,000 | 24,000 |
| 3 | 40,000 | 32,000 |
| 4 | 24,000 | 48,000 |
| 5 | 16,000 | 32,000 |
Required:
Evaluate the two alternatives using the following:
(ai) payback method
(aii) Which project should be chosen based on payback method? 5 marks
(b) net present value method 12 marks
c) Profitability Index 4 marks
d) If the projects are independent, which project should Dawson choose?
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Comprehensive Assurance & Systems Tool
Authors: Laura IngrahamJ Jenkins
2nd Edition
0131377213, 9780131377219
