Question
GlobalTech Inc. is evaluating three new manufacturing machines. The details are as follows. The corporate tax rate is 30%, and the cost of capital is
- GlobalTech Inc. is evaluating three new manufacturing machines. The details are as follows. The corporate tax rate is 30%, and the cost of capital is 8%.
Particulars | Machine X (₹) | Machine Y (₹) | Machine Z (₹) |
Initial investment | 6,00,000 | 4,50,000 | 5,00,000 |
Estimated annual sales | 7,00,000 | 6,50,000 | 5,90,000 |
Cost of production: | |||
Direct material | 70,000 | 60,000 | 55,000 |
Direct labour | 80,000 | 70,000 | 65,000 |
Factory overhead | 90,000 | 80,000 | 75,000 |
Administration cost | 40,000 | 35,000 | 30,000 |
Selling & Distribution cost | 25,000 | 20,000 | 15,000 |
- The economic life of machine X is 3 years, while it is 2 years for the other two. The scrap values are ₹70,000, ₹40,000, and ₹30,000 respectively. You are required to find out the most profitable investment based on the payback period method.
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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
