. Which machine should be selected using the Payback period method? 2. Which machine should be selected using the Accounting rate of return based on the net investment method? 3. Which machine should be selected using the Internal rate of return method? 4.Which machine should be selected using the Net present value, (cost of capital = 10%) method? 5.Which machine should be selected using the Net present value, (cost of capital = 12%) method?
. Which machine should be selected using the Payback period method? 2. Which machine should be selected using the Accounting rate of return based on the net investment method? 3. Which machine should be selected using the Internal rate of return method? 4.Which machine should be selected using the Net present value, (cost of capital = 10%) method? 5.Which machine should be selected using the Net present value, (cost of capital = 12%) method?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
1. Which machine should be selected using the Payback period method?
2. Which machine should be selected using the Accounting
3. Which machine should be selected using the
4.Which machine should be selected using the
5.Which machine should be selected using the Net present value, (cost of capital = 12%) method?
Transcribed Image Text:FM Manufacturing Co. considers the purchase of two differenttypes of machines, Machine A and
Machine B, to manufacture ball bearings, one of the many products it produces for the car market.
Each machine will cost P750.000. wil have 5 years economic life with zero salvage value. Both
machines will meet the capacity of the projected demand.
The operating after-tax cash flow per year of each machine is as follows:
Period
Machine A
Machine B
(P750,000)
P750,000)
P100,000
P250,000
P200,000
P250,000
3
P200.000
P250,000
P300,000
P250,000
P550.000
P250,000
FM has to decide which of the two machines to buy for the manufacture of ball bearings. The Vice-
president for manufacturing was unsure of which method of ranking alternatives to use.
Use 3 decimal places for the PV factors.
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