Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. healthy food ltd is considering to invest in one o

Healthy Food Ltd is considering to invest in one of the two following projects to...

50.1K

Verified Solution

Question

Accounting

Healthy Food Ltd is considering to invest in one of the two following projects to buy new machinery. Each option will last 5 years and have no salvage value at the end. The companys required rate of return for all investment projects is 7%. The cash flows of the projects are provided below.

Machinery 1

Machinery 2

Cost

$396,000

$415,000

Future Cash Flows

Year 1

Year 2

Year 3

Year 4

Year 5

123,000

194,000

205,000

215,000

228,000

196, 000

204,000

212,000

217,000

233,000

Required:

a) Identify which option of machinery should the company accept based on NPV method (Note: Please round up the result of each calculation of PV to 2 decimal places only for simplification) (4 marks)

ANSWER a):

b) Identify which option of machinery should the company accept based on the simple payback period method if the firm maintains a policy that every investment project should recover the initial investment within 2 years. (3 marks)

ANSWER: b)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Chemistry
1.2K views

1. if a buffer has a 4 charge and it is involved in removing two hydrogen...

Biology
1.2K views

A drug is designed to stimulate the voltage gated calcium channel at the neuronal synapse. What...

Finance
1.2K views

Discuss alternatives available for companies to raise capital. Describe the pros and cons a company must...

Physics
1.2K views

Mock Test Paper Code MTK 06 A sinusoidal a c current passes through a resistance...

Geometry
1.2K views

Which of the following terms is used to describe the organization s defined goal Mission

Basic Math
1.2K views

6 each can break apart a 9 X 6 array into two smaller arrays for...

Basic Math
1.2K views

The velocity function for an object is given to the right. Assuming that the object...

Calculus
1.2K views

1 cot 0 sin 0 1 Which of the following shows the key steps in...

Algebra
1.2K views

10 8 6 6 The function is I There is function is 2 I 0...

Algebra
1.2K views

Which equation shows the quadratic formula used correctly to solve 5x2 3x 4 0 for...

Accounting
1.2K views

Recording Entries for Equity Investment: Equity Method, Partial Year On July 1, 2020, Allen Corporation...

Accounting
1.2K views

81. Which of the following products would be expected to have the highest gross margin...