Question
FastFoods Inc. is considering three new food processing machines. The details are provided below. The corporate tax rate is 26%, and the interest on capital
- FastFoods Inc. is considering three new food processing machines. The details are provided below. The corporate tax rate is 26%, and the interest on capital is 10%.
Particulars | Machine F1 (₹) | Machine F2 (₹) | Machine F3 (₹) |
Initial investment | 4,50,000 | 3,50,000 | 5,50,000 |
Estimated annual sales | 6,50,000 | 6,00,000 | 7,00,000 |
Cost of production: | |||
Direct material | 55,000 | 50,000 | 65,000 |
Direct labour | 65,000 | 60,000 | 75,000 |
Factory overhead | 75,000 | 70,000 | 85,000 |
Administration cost | 30,000 | 25,000 | 35,000 |
Selling & Distribution cost | 25,000 | 20,000 | 30,000 |
- The economic life of machine F1 is 2 years, while it is 3 years for the other two. The scrap values are ₹50,000, ₹40,000, and ₹30,000 respectively. Use the payback period method to find the best investment.
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Using Financial Accounting Information The Alternative to Debits and Credits
Authors: Gary A. Porter, Curtis L. Norton
9th edition
978-1285183244, 128518324X, 978-1285779263, 1285779266, 978-1285183237
