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Required: Appraise both investments using the 4 main methods of investment appraisal. The appropriate discount rate is 10%.

Required: Appraise both investments using the 4 main methods of investment appraisal. The appropriate discount rate is 10%.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Help the aged Ltd is considering which of two machines to buy to make a new product. The market for the product looks promising and the company is confident that it can sell the entire product it can make at $20 per unit. The extra variable manufacturing cost per unit is $10 regardless of which machine is used. Both machines have an expected useful life to of 5 years. The machines: Machine Y Will cost $19,000 to buy and install. It will have no scrap value at the end of its life. Machine Z Will cost $26,000 to buy and install. It can be sold for $1,000 at the end of the project period. Predicted production Year 1 2 3 4 5 Units produced y Z 800 1,200 500 400 100 1,000 1,000 1,200 900 200 Required: Appraise both investments using the 4 main methods of investment appraisal. The appropriate discount rate is 10%.
Transcribed Image Text:Help the aged Ltd is considering which of two machines to buy to make a new product. The market for the product looks promising and the company is confident that it can sell the entire product it can make at $20 per unit. The extra variable manufacturing cost per unit is $10 regardless of which machine is used. Both machines have an expected useful life to of 5 years. The machines: Machine Y Will cost $19,000 to buy and install. It will have no scrap value at the end of its life. Machine Z Will cost $26,000 to buy and install. It can be sold for $1,000 at the end of the project period. Predicted production Year 1 2 3 4 5 Units produced y Z 800 1,200 500 400 100 1,000 1,000 1,200 900 200 Required: Appraise both investments using the 4 main methods of investment appraisal. The appropriate discount rate is 10%.
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