Next Technology considers the purchase of two (2) different types of machines, Machine A and Machine B,to manufacture microchips, one of the many products it releases to the computer market. Each machinewill cost P750,000, will have five (5) years of economic life, with zero salvage value. Both machines will meetthe capacity of projected demand.The operating after-tax cash flow per year of each machine is as follos:YearMachine AMachine B14(750,000)(750,000)100,000250,000200,000550,000250,000200,000300,000250,000250,000250,000Next Technology has to decide which of the two (2) machines to buy for the manufacture of the microchips.The Vice-President for Manufacturing wants to use different methods to make the decision.Required: You are requested to make calculations under the following methods to recommend which machineto buy:a.Payback periodb.Rate of return

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Next Technology considers the purchase of two (2) different types of machines, Machine A and Machine B, to manufacture microchips, one of the many products it releases to the computer market. Each machine will cost P750,000, will have five (5) years of economic life, with zero salvage value. Both machines will meet the capacity of projected demand. The operating after-tax cash flow per yearofeach machine is as follos: Year Machine A Machine B 1 2 3. 4 100,000 250,000 200,000 300,000 550,000 250,000 (750,000) 200,000 (750,000) 250,000 250,000 250,000 Next Technology has to decide which of the two (2) machines to buy for the manufacture of the microchips. The Vice-President for Manufacturing wants to use different methods to make the decision.

Next Technology considers the purchase of two (2) different types of machines, Machine A and Machine B, to manufacture microchips, one of the many products it releases to the computer market. Each machine will cost P750,000, will have five (5) years of economic life, with zero salvage value. Both machines will meet the capacity of projected demand. The operating after-tax cash flow per yearofeach machine is as follos: Year Machine A Machine B 1 2 3. 4 100,000 250,000 200,000 300,000 550,000 250,000 (750,000) 200,000 (750,000) 250,000 250,000 250,000 Next Technology has to decide which of the two (2) machines to buy for the manufacture of the microchips. The Vice-President for Manufacturing wants to use different methods to make the decision.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 13P

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