Question
Suzy is a company located in Dubai. The company manufactures machine parts in Oman. It is currently involved in making a decision concerning the acquisition
Suzy is a company located in Dubai. The company manufactures machine parts in Oman. It is currently involved in making a decision concerning the acquisition of new machining tool. Two different versions of the tool are available: Y & Z. The results of NPV and IRR of the two alternatives are summarized below: Tools, Net Present Value (NPV), Internal Rate of Return (IRR) Y AED68.36m, 10.5%, Z AED55.52m, 14.6%. Required: (a) On the basis of NPV and IRR findings above, formulate your investment decision advice. (2 marks), (b) Using NPV decision rule for mutually exclusive projects, indicate which tools the company should accept. (2 marks). (c) Using IRR decision rule for mutually exclusive projects indicate which tools the company should accept. (2 marks). (d) Do you conclusion in (b) and (c) similar? If no, which one is more superior to the other? (2 marks). (e) State clearly any limitations and assumptions that you made in your calculations. (3 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started