ABM Enterprise needs a machine for its manufacturing process. The cost of machine is P120,700. The expected useful life of the machine is 6 years, no salvage value. After installation, the machine would increase cash inflows by P38,000 per year. The minimum required rate of return of the company is 16% on all capital investments. You are asked to help the ABM Enterprise in making decision whether to purchase or not to purchase the machine using the following approaches: a. Payback period method b. Net present value method c. Account rate of return
ABM Enterprise needs a machine for its manufacturing process. The cost of machine is P120,700. The expected useful life of the machine is 6 years, no salvage value. After installation, the machine would increase cash inflows by P38,000 per year. The minimum required rate of return of the company is 16% on all capital investments. You are asked to help the ABM Enterprise in making decision whether to purchase or not to purchase the machine using the following approaches: a. Payback period method b. Net present value method c. Account rate of return
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
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Transcribed Image Text:ABM Enterprise needs a machine for its manufacturing process. The cost of machine is P120,700. The
expected useful life of the machine is 6 years, no salvage value. After installation, the machine would increase
cash inflows by P38,000 per year. The minimum required rate of return of the company is 16% on all capital
investments. You are asked to help the ABM Enterprise in making decision whether to purchase or not to
purchase the machine using the following approaches:
a. Payback period method
b. Net present value method
C.
Account rate of return
d. Profitability index
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