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ACC202S(F)/ Page 12 of 14 c) Fabric World Inc is considering a new mechanical system...

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ACC202S(F)/ Page 12 of 14 c) Fabric World Inc is considering a new mechanical system which will significantly reduce its manufacturing costs. The new system requires a capital investment of $750,000 with an estimated useful life of 4 years and no residual value. Fabric World Inc required a rate of return of 12% for this system. The following is the estimated net cashflows from the machine. Year 1 ..... Year 2 Year 3 Year 4 $ 300,000 $ 260,000 $ 208,000 $ 180,000 Required: (1) Compute the net present value of the investment. (5 marks) (ii) Should Fabric World Inc proceed with the investment? Explain. (1 mark) (Total: 20 marks) -THE END- ACC202S (Final) May 2021 Session

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