Question
Tech Innovators is deciding between three new laser machines. The details are as follows. The corporate tax rate is 20%, and the cost of capital
- Tech Innovators is deciding between three new laser machines. The details are as follows. The corporate tax rate is 20%, and the cost of capital is 11%.
Particulars | Machine P (₹) | Machine Q (₹) | Machine R (₹) |
Initial investment | 5,00,000 | 4,00,000 | 6,00,000 |
Estimated annual sales | 8,00,000 | 7,00,000 | 9,00,000 |
Cost of production: | |||
Direct material | 75,000 | 65,000 | 70,000 |
Direct labour | 85,000 | 75,000 | 80,000 |
Factory overhead | 95,000 | 85,000 | 90,000 |
Administration cost | 45,000 | 35,000 | 40,000 |
Selling & Distribution cost | 30,000 | 25,000 | 35,000 |
- The economic life of machine P is 2 years, while it is 3 years for the other two. The scrap values are ₹60,000, ₹50,000, and ₹40,000 respectively. Determine the most profitable investment based on the payback period method.
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Using Financial Accounting Information The Alternative to Debits and Credits
Authors: Gary A. Porter, Curtis L. Norton
9th edition
978-1285183244, 128518324X, 978-1285779263, 1285779266, 978-1285183237
