What is the answers for (a), (b), (c), (d)???
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Section 4 continued (d) What is the internal rate of return (IRR) of the machine investment project for Badade Company? (Use the Present Value table provided. Hint: Trial and Error. You already know the NPV of this project at 15%. Try either 20 % or 25%. Round your calculations to two decimal places.) (8 marks) ARR = 30.30% Opportunity cost of finance is 15% ARR greater than opportunity cost of finance -Accept PP is 3.13 years, Target is 3 years No, reject because PP is higher than target NPV = 6810Section 4 Continued (b) What is the payback period for B of the machine? (3 marks) adade Company if they were to invest in the purchase jPP is between years 3 and 4 PP is 3.13__or 3, 2/15 years SECTION 4: Capital investment decisions - Investment Appraisal Methods (25 marks) The Badade Company (BC) has recently carried out research which indicates that with an investment in a machine that would cost $300,000; they would be able to provide to improve their production processes. The use of the machine would take place throughout the next six years. It is estimated that the machine could be disposed of, for $30,000. Zhao, the CEO wants an evaluation of this potential investment. Li, the Finance Manager indicates the opportunity cost of finance for investments is 15% while Ram, the Management Accountant indicates that the minimum Payback Period for investments should be 3 years. Cash Inflows and Outflows from the machine investment would be expected to be as follows: Time $000 Immediately Cost of machine (300) 1 years' time Operating profit before depreciation 50 2 years' time Operating profit before depreciation 90 3 years' time Operating profit before depreciation 140 4 years' time Operating profit before depreciation 150 5 years' time Operating profit before depreciation 80 6 years' time Operating profit before depreciation 60 6 years' time Disposal proceeds from the machine 30 Show all your workings clearly for this section of the paper and round relevant final calculations to two decimal places. Required: (a) What is the Accounting Rate of Return (ARR) of buying the machine? (4 marks) Annual annual operating profit = 300000 / 6 =50000 Average investment = (300000 + 30000) / 2 =165000 ARR = 50000/165000 * 100 = 30.3%