PQR Textiles is planning to purchase a new machine to meet increasing demand. The details...
80.2K
Verified Solution
Link Copied!
Question
Accounting
PQR Textiles is planning to purchase a new machine to meet increasing demand. The details of three machines under consideration are given below. Assume all sales are on cash. The corporate income-tax rate is 38%. Interest on capital may be assumed to be 8%.
Particulars
Machine T(Rs)
Machine U(Rs)
Machine V(Rs)
Initial investment
3,60,000
3,80,000
4,20,000
Estimated annual sales
5,00,000
5,20,000
5,60,000
Cost of production:
Direct material
55,000
60,000
65,000
Direct labour
50,000
55,000
60,000
Factory overhead
70,000
75,000
80,000
Administration cost
15,000
18,000
20,000
Selling & Distribution cost
10,000
12,000
14,000
The economic life of Machine T is 4 years, Machine U is 3 years, and Machine V is 5 years. The scrap values are Rs.20,000, Rs.25,000, and Rs.30,000 respectively. Calculate the most profitable investment based on the payback period method
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!
