QUESTION 4 (25 marks) Quatsch Ltd. intends to buy a new machine for production. Calculations for Machine A have already
Posted: Thu Apr 28, 2022 11:05 am
- Question 4 25 Marks Quatsch Ltd Intends To Buy A New Machine For Production Calculations For Machine A Have Already 1 (40.09 KiB) Viewed 23 times
QUESTION 4 (25 marks) Quatsch Ltd. intends to buy a new machine for production. Calculations for Machine A have already been prepared as follows: Payback Period 2 years Net Present Value £1,500 Machine B costs £12,000 and has a scrap value of £3,000. A special technical report was carried out for this machine costing £1,000. The company uses a 9% discount rate. Net operating cashflows for Machine B. £ Year 1 7,000 Year 2 4,000 Year 3 2,000 a) Why is it important to appraise capital investments? (3 marks) b) Make similar calculations (to those for Machine A) for Machine B. (6 marks)