Question $1.$

Metal Components Ltd$.$ is an engineering company producing to individual

customer requirements. The company is now considering the purchase of a new

machine to meet the increased demand for its products. The following

information is available:

The new machine is expected to cost $l250,000$ payable on the $1^{st}$ January $2021$

and will have a useful life of $5$ years. The scrap value of the machine at the end of

year $5$ is $25,000.$ There is a working capital requirement from the

commencement of the project of $40,000.$ The net profits and cash flows are as

follows:

The company has a cost of capital of $14\%.$

The working capital is released back to the company in year $6.$

You are required to calculate:

a$.$ Payback

b$.$ Net Present Value

c$.$ Internal Rate of Return

d$.$ Accounting Rate of Return

e$.$ Is the machine viable.? Give your reasons.

$(10$ marks$).$

$(10$ marks$).$

$(10$ marks$).$

$(10$ marks$).$

$(10$ marks$).$

Present Value of $lon1$