Nestle Ltd. Production department realized that one of their machines needs to be replaced and the following assets are proposed. Nestle has assigned $1.5 million dollars to purchase the asset(s). Nestle’s WACC is 8%. Years Asset L Asset M Asset N Initial Costs $700,000 $800,000 $500,000 Expected Cash Inflows: 2018 300,000 200,000 2019 250,000 200,000 200,000 2020 200,000 200,000 200,000 2021 150,000 200,000 150,000 2022 200,000 150,000 Requirement: Recommend which Asset(s) the company should purchase based on the Payback and Net Present Value Capital Budgeting Techniques. If the funds allow for the purchase of more than one asset, rank them from most favorable to least and select the ones to be purchased.
Nestle Ltd. Production department realized that one of their machines needs to be replaced and the following assets are proposed. Nestle has assigned $1.5 million dollars to purchase the asset(s). Nestle’s WACC is 8%. Years Asset L Asset M Asset N Initial Costs $700,000 $800,000 $500,000 Expected Cash Inflows: 2018 300,000 200,000 2019 250,000 200,000 200,000 2020 200,000 200,000 200,000 2021 150,000 200,000 150,000 2022 200,000 150,000 Requirement: Recommend which Asset(s) the company should purchase based on the Payback and Net Present Value Capital Budgeting Techniques. If the funds allow for the purchase of more than one asset, rank them from most favorable to least and select the ones to be purchased.
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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Nestle Ltd. Production department realized that one of their machines needs to be replaced and the following assets are proposed. Nestle has assigned $1.5 million dollars to purchase the asset(s). Nestle’s WACC is 8%.
|
Years |
Asset L |
Asset M |
Asset N |
|
Initial Costs |
$700,000 |
$800,000 |
$500,000 |
|
Expected |
|
|
|
|
2018 |
300,000 |
200,000 |
|
|
2019 |
250,000 |
200,000 |
200,000 |
|
2020 |
200,000 |
200,000 |
200,000 |
|
2021 |
150,000 |
200,000 |
150,000 |
|
2022 |
|
200,000 |
150,000 |
Requirement: Recommend which Asset(s) the company should purchase based on the Payback and
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