PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing J M N 0 P D4 XVfx A B E F G H 5 6 Wiseman Industries has details of three machines that could fulfil the company's future production plans. Only one of these would be purchased Depreciation is written off on the straight line method for all three machines. 8 The company's cost of capital is 10%. 9 The initial cost and cash inflows for these machines are as follows. 10 11 Initial cost 12 Net cash inflows: 13 Year 1 14 Year 2 15 Year 3 16 Year 4 17 Year 5 18 Year 6 19 Year 7 Machine A Machine B Machine C -$ 50 000 -$ 50 000 -$ 50 000 $ 10 000 $ 10 000 $ 10 000 $ 20 000 $ 10 000 $ 20 000 S 20 000 $ 10 000 $ 18 000 $ 20 000 $ 20 000 $ 3500 $ 10 000 $ 30 000 $ 3500 S $ 30 000 $ $ 30 000 20 21 REQUIRED 22 23 Advise management which machine to purchase by using the following methods: 24 25 A) Calculate the Net Present Value). 26 27 28 29 30 31 32 33 34 B) Profitability Index Profitability Index Present Value of Net Cash Flows = Initial Investment 35 36 37 C) Which of the three machines should Wiseman industries purchase? 38 39 1.5 Marks 1.5 Marks 2 Marks