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hi, need a detailed explanation and steps, thank you Quick Builders in the process of purchasing a high teach machinery for their new construction site
hi, need a detailed explanation and steps, thank you
Quick Builders in the process of purchasing a high teach machinery for their new construction site in reginal Victoria. Currently they evaluate following 2 options. Both the projects have same useful time and existing know how and employee skills are sufficient to operate the machine. The firm discounts any investment project's cash flows at 12%. Year Machine A (Made in USA) ($2.2M) 760,000 Machine B (Made in UK) ($3M) 0 1 2 650000 3 500000 850,000 750,000 750,000 750,000 660,000 4 450000 5 350000 Required: a. Quick Builders has a policy of preferring any investment project that has the comparatively lowest Pay-back period. Based on this criterion, which machine would you recommend and why? b. Calculate the net present value (NPV) of each machine and based on this criterion, indicate which machine you would recommend to purchase. Why? c. Calculate the profitability index (PI) of each machine and based on this criterion, indicate which machine you would recommend for purchase. d. In your opinion, which machine the company should buy? Are you able to give a clear recommendation? Why? e. Discuss what other non-financial factors the company must consider before making a final decisionStep by Step Solution
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