Question z
You are working as a finance manager for Fire Fox Transport Ltd. The company is considering to invest in one of the two following projects to buy a new equipment for their storage which is expected to boost the company’s revenue. Each equipment will last 5 years and have no salvage value at the end. The company’s required rate of
|
|
Equipment 1 |
Equipment 2 |
|
Cost |
$157,000 |
$182,000 |
|
Future Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 |
67 000 82 000 78 000 64 000 56 000 |
83 000 94 000 80 000 77 000 73 000 |
Required:
a) Identify which option of equipment should the company accept based on
b) Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 3 years?
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