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6 yes M/S Rohini Lid wants to enter into the field of production and sale of household appliances Following details ate available to select the
6 yes M/S Rohini Lid wants to enter into the field of production and sale of household appliances Following details ate available to select the best Machine to start production Particulars Machine Alpha Machine Beta Purchase price 25,00.000 35,00.000 Installation costs 250.000 NIL Salvage value at the end of the life 21.50.OKKO 3,50.000 Estimated economie life 4 years Installed production Capacity 1.20,000 units 1,30.000 units Projected sales as a % of installed capacity Year 4096 30% Year 2 30% 20% Year 3 20% 20% Year 4 10% 15% Year 5 10% Year 6 5% Depreciation 25% Written Down Value method Corporate tax rate 30% In addition, the cost and revenue details are given as follows: Year Selling price per Variable cost to Fixed cost per unit sales ratio (%) init 1 500 70 Rs.75 2 *600 75 Rs 80 3 Suggest to the management of the firm applying an appropriate 3650 80 Rs.80 4 750 80 Rs. 60 5 *750 90 Rs. 50 6 *800 90 Rs. 50 method which Machine will be most profitable to start production assuming the required rate of return to be 12%? (20 Marks)
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