Question
The management team of Lariosauro Ltd. has the following potential projects available to its production business PROJECT #1 - New production line Cost $205,000 Cost
The management team of Lariosauro Ltd. has the following potential projects available to its production business PROJECT #1 - New production line Cost $205,000 Cost savings per year $55,000 Life of machine 5 years Salvage $13,000 Project #2 - New specialty truck Cost $122,000 Cost savings per year $30,000 Life of machine Salvage Project #3 - New equipment 5 years $20,000 Cost Cost savings per year Life of machine Salvage $175,000 $40,000 5 years $50,000 Lariosauro has alternate investments that earn 11%. REQUIRED: PART 1 To help management decide on its capital budgeting planning for next year, you have been asked to provide guidan projects. Provide the following (11 Marks): here to search II 0 Cost savings per year Life of machine Salvage Project #3 - New equipment Cost Cost savings per year Life of machine Salvage $30,000 5 years $20,000 $175,000 $40,000 5 years $50,000 Lariosauro has alternate investments that earn 11%. REQUIRED: PART 1 To help management decide on its capital budgeting planning for next year, you have been asked to provide guidance as to prioritizing the projects. Provide the following (11 Marks): NPV for each project Profitability index for each project Order of priority for the projects PART 2 Calculate the simple payback in years for each project. Ignore salvage values.(3 Marks) I FY T i- B I ype here to search !!! BB % E
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