Question
please help me to solve this questions, thanks for the help The production manager of Baristas Ltd is considering to add 3 coffee machines to
please help me to solve this questions, thanks for the help
The production manager of Baristas Ltd is considering to add 3 coffee machines to cater the demands of their signature coffee brew items. The cost of the coffee machine is 2,000 each. The supplier will charge a one-off installation cost of 100. The machines have a 5 year economic life with no salvage value. The machines will increase their annual revenues by 1000 with the total costs of operating the new machines of 350 annually. The production manager has a budget of $7,000 for investment. The financial manager stated that the company's WACC is 14%.
Question:
- Calculate the initial cashflow for the machines!
- Calculate the annual incremental cashflow in year 1 to 5!
- Will Barista Ltd invest in the new coffee machines? (based your answer on at least 2 of the following: NPV, PI, IRR, Modified payback period)
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