Homework Help is Here – Start Your Trial Now!
Business
Finance
a) A project requires the purchase of a new piece of machinery. choose between three potential machines (Machine A, Machine B and Machine C), either of which would be suitable. The cost of each machine is identical at You are the project manager and must £1,634,500. However, they differ in performance such that the projected future cash flows are different for each machine. Projected cash flows over a 5 year period are shown in Table Qla:. Year Cash Flow: Cash Flow: Cash Flow: Machine A Machine B Machine C 0 I 950,000 950,000 200,000 2 700,500 684,500 280,000 -£1,634,500 -£1,634,500 -£1,634,500 3 560,500 600,000 440,000 4 240,000 575,000 600,000 5 130,000 550,000 800,000 Table Qla. (1) Show the Payback Period and Total Income for each machine (Machine A, Machine B and Machine C). NOTE: ALL calculations must be shown. (ii) For each machine (Machine A, Macnıne B and Machine C) calculate Return on Investment (ROI). NOTE: ALL calculations must be shown. (ii) For each machine (Machine A, Machine B and Machine C) calculate the Net Present Value (NPV) after 5 years assuming a discount (inflation) rate of 5% for each year of the project. Table Qla(iii). provides a list of discount factors for a range of discount (inflation) rates. NOTE: ALL calculations must be shown. b) The project manager can purchase one machine only. State which machine the project manager should select and provide justification for their choice of machine based on your analysis of the data. Discount Factors for given discount (inflation) rates over a 5-year period Years 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264 3 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 4 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 5 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209

a) A project requires the purchase of a new piece of machinery. choose between three potential machines (Machine A, Machine B and Machine C), either of which would be suitable. The cost of each machine is identical at You are the project manager and must £1,634,500. However, they differ in performance such that the projected future cash flows are different for each machine. Projected cash flows over a 5 year period are shown in Table Qla:. Year Cash Flow: Cash Flow: Cash Flow: Machine A Machine B Machine C 0 I 950,000 950,000 200,000 2 700,500 684,500 280,000 -£1,634,500 -£1,634,500 -£1,634,500 3 560,500 600,000 440,000 4 240,000 575,000 600,000 5 130,000 550,000 800,000 Table Qla. (1) Show the Payback Period and Total Income for each machine (Machine A, Machine B and Machine C). NOTE: ALL calculations must be shown. (ii) For each machine (Machine A, Macnıne B and Machine C) calculate Return on Investment (ROI). NOTE: ALL calculations must be shown. (ii) For each machine (Machine A, Machine B and Machine C) calculate the Net Present Value (NPV) after 5 years assuming a discount (inflation) rate of 5% for each year of the project. Table Qla(iii). provides a list of discount factors for a range of discount (inflation) rates. NOTE: ALL calculations must be shown. b) The project manager can purchase one machine only. State which machine the project manager should select and provide justification for their choice of machine based on your analysis of the data. Discount Factors for given discount (inflation) rates over a 5-year period Years 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264 3 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 4 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 5 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209

Essentials Of Investments
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
See similar textbooks
icon
Related questions
Question
a) A project requires the purchase of a new piece of machinery. You are the project manager and must choose between three potential machines (Machine A, Machine B and Machine C), either of which would be suitable. The cost of each mạchine is identical at £1,634,500. However, they differ in performance such that the projected future cash flows are different for each machine. Projected cash flows over a 5 year period are shown in Table Qla:. Year Cash Flow: Cash Flow: Cash Flow: Machine A Machine B Machine C 0 -£1,634,500 -£1,634,500 -£1,634,500 950,000 950,000 200,000 2 700,500 684,500 280,000 3 560,500 600,000 440,000 4 240,000 575,000 600,000 5 130,000 550,000 800,000 Table Qla. (i) Show the Payback Period and Total Income for each machine (Machine A, Machine B and Machine C). NOTE: ALL calculations must be shown. (ii) For each machine (Machine A, Machine B and Machine C) calculate Return on Investment (RO). NOTE: ALL calculations must be shown. (iii) For each machine (Machine A, Machine B and Machine C) calculate the Net Present Value (NPV) after 5 years assuming a discount (inflation) rate of 5% for each year of the project. Table Qla(iii). provides a list of discount factors for a range of discount (inflation) rates. NOTE: ALL calculations must be shown. b) The project manager can purchase one machine only. State which machine the project manager should select and provide justification for their choice of machine based on your analysis of the data. Discount Factors for given discount (inflation) rates over a 5-year period Years 1% 2% 3%| 4% 5% 6% 7% 8% 9% | 10% 1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 2 0.9803 0.9426 0.9246 0.9070 0.8573 0.9612 0.8900 0.8734 0.8417 0.8264 3 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 4 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 Table Qla (iii).
Transcribed Image Text:a) A project requires the purchase of a new piece of machinery. You are the project manager and must choose between three potential machines (Machine A, Machine B and Machine C), either of which would be suitable. The cost of each mạchine is identical at £1,634,500. However, they differ in performance such that the projected future cash flows are different for each machine. Projected cash flows over a 5 year period are shown in Table Qla:. Year Cash Flow: Cash Flow: Cash Flow: Machine A Machine B Machine C 0 -£1,634,500 -£1,634,500 -£1,634,500 950,000 950,000 200,000 2 700,500 684,500 280,000 3 560,500 600,000 440,000 4 240,000 575,000 600,000 5 130,000 550,000 800,000 Table Qla. (i) Show the Payback Period and Total Income for each machine (Machine A, Machine B and Machine C). NOTE: ALL calculations must be shown. (ii) For each machine (Machine A, Machine B and Machine C) calculate Return on Investment (RO). NOTE: ALL calculations must be shown. (iii) For each machine (Machine A, Machine B and Machine C) calculate the Net Present Value (NPV) after 5 years assuming a discount (inflation) rate of 5% for each year of the project. Table Qla(iii). provides a list of discount factors for a range of discount (inflation) rates. NOTE: ALL calculations must be shown. b) The project manager can purchase one machine only. State which machine the project manager should select and provide justification for their choice of machine based on your analysis of the data. Discount Factors for given discount (inflation) rates over a 5-year period Years 1% 2% 3%| 4% 5% 6% 7% 8% 9% | 10% 1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 2 0.9803 0.9426 0.9246 0.9070 0.8573 0.9612 0.8900 0.8734 0.8417 0.8264 3 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 4 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 Table Qla (iii).
Expert Solution
steps

Step by step

Solved in 7 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Economic Value Added
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS