Question
YZA Corporation is evaluating three machines for purchase to expand its production. The details are as follows. The corporate tax rate is 26%, and the
YZA Corporation is evaluating three machines for purchase to expand its production. The details are as follows. The corporate tax rate is 26%, and the interest on capital is 9%.
Particulars | Machine A (Rs) | Machine B (Rs) | Machine C (Rs) |
Initial Investment | 13,00,000 | 14,00,000 | 15,00,000 |
Estimated Annual Sales | 16,00,000 | 17,00,000 | 18,00,000 |
Cost of Production: | |||
Direct Material | 1,50,000 | 1,60,000 | 1,70,000 |
Direct Labour | 1,60,000 | 1,70,000 | 1,80,000 |
Factory Overhead | 1,80,000 | 1,90,000 | 2,00,000 |
Administration Cost | 75,000 | 80,000 | 85,000 |
Selling & Distribution Cost | 65,000 | 70,000 | 75,000 |
The economic life of Machine A is 5 years, while it is 6 years for the other two. The scrap values are Rs. 1,40,000, Rs. 1,50,000, and Rs. 1,60,000 respectively. Using the payback period method, identify the best investment.
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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
11th Canadian edition Volume 1
1119048532, 978-1119048534
