Digi Corporation is considering replacing a hand operated machine with a brand new fully automated machine. The company has two types of machine to choose and they are mutually exclusive. The firm's cost of capital is 10%. Below are the expected cash flows generated by both machines? Initial Investment Year 1 Year 2 Year 3 Year 4 Year 5 Calculate the following: Machine AA Machine BB Mesin AA Mesin BB (RM100,000) (RM100,000) RM15,000 RM35,000 RM40,000 RM35,000 RM25,000 RM35,000 RM60,000 RM35,000 RM35,000 RM35,000 a) Payback period for both machines b) Net present value for both machines c) Internal rate of return for Machine BB d) Which machine should the company choose and why? e) What are the benefits of capital budgeting?
Digi Corporation is considering replacing a hand operated machine with a brand new fully automated machine. The company has two types of machine to choose and they are mutually exclusive. The firm's cost of capital is 10%. Below are the expected cash flows generated by both machines? Initial Investment Year 1 Year 2 Year 3 Year 4 Year 5 Calculate the following: Machine AA Machine BB Mesin AA Mesin BB (RM100,000) (RM100,000) RM15,000 RM35,000 RM40,000 RM35,000 RM25,000 RM35,000 RM60,000 RM35,000 RM35,000 RM35,000 a) Payback period for both machines b) Net present value for both machines c) Internal rate of return for Machine BB d) Which machine should the company choose and why? e) What are the benefits of capital budgeting?
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
Transcribed Image Text:Digi Corporation is considering replacing a hand operated machine with a brand new fully
automated machine. The company has two types of machine to choose and they are mutually
exclusive. The firm's cost of capital is 10%. Below are the expected cash flows generated by
both machines?
Initial Investment
Year 1
Year 2
Year 3
Year 4
Year 5
Calculate the following:
Machine AA
Machine BB
Mesin AA
Mesin BB
(RM100,000)
(RM100,000)
RM15,000
RM35,000
RM40,000
RM35,000
RM25,000
RM35,000
RM60,000
RM35,000
RM35,000
RM35,000
a) Payback period for both machines
b) Net present value for both machines
c) Internal rate of return for Machine BB
d) Which machine should the company choose and why?
e) What are the benefits of capital budgeting?
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education