Question 14(5 points)

The owner of the company you work for has presented you with data about a potential investment.

Machine

Original outlay (beginning of Year 1):$350 000

Expected net cash inflow:

Year

Amount

1

$45 000

2

$45 000

3

$55 000

4

$50 000

Salvage value (expected in year 4)

$105 000

The owner of the company estimates the cost of capital to be 7%.The company has enough funds to meet all capital expenditure requirements.

discount factor at 7%

period 1 = 0.935

period 2 = 0.873

period 3 = 0.816

period 4 = 0.762

c.Applying the concept of a Life Cycle Analysis, list and explain three other factors that should be included for further investigation within your investment appraisal above (5 marks).