Brew Ltd. introduced a new product, DV, to its range last year. The machine used to mould each item is a bottleneck in the production process meaning that a maximum of 5,000 units per annum can be manufactured. Year 0 $’000 Year 1 $’000 Year 2 $’000 Year 3 $’000 Year 4 $’000 Investment (20) Income 65 155 200 (20) Operating Cost (71) (127) (155) (15) No terminal value or machinery scrap value is expected at the end of four years, when production of DV is planned to end. For investment appraisal purposes, Brew Ltd. uses a nominal (money) discount rate of 10%per year calculate the discounted payback period.
Brew Ltd. introduced a new product, DV, to its range last year. The machine used to mould each item is a bottleneck in the production process meaning that a maximum of 5,000 units per annum can be manufactured. Year 0 $’000 Year 1 $’000 Year 2 $’000 Year 3 $’000 Year 4 $’000 Investment (20) Income 65 155 200 (20) Operating Cost (71) (127) (155) (15) No terminal value or machinery scrap value is expected at the end of four years, when production of DV is planned to end. For investment appraisal purposes, Brew Ltd. uses a nominal (money) discount rate of 10%per year calculate the discounted payback period.
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
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Brew Ltd. introduced a new product, DV, to its range last year. The machine used to mould each item is a bottleneck in the production process meaning that a maximum of 5,000 units per annum can be manufactured.
|
|
Year 0 $’000 |
Year 1 $’000 |
Year 2 $’000 |
Year 3 $’000 |
Year 4 $’000 |
|
Investment |
(20) |
|
|
|
|
|
Income |
|
65 |
155 |
200 |
(20) |
|
Operating Cost |
|
(71) |
(127) |
(155) |
(15) |
No terminal value or machinery scrap value is expected at the end of four years, when production of DV is planned to end. For investment appraisal purposes, Brew Ltd. uses a nominal (money) discount rate of 10%per year calculate the discounted payback period.
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