Machinery Ltd is considering to invest in one of the two following Projects to buy a newequipment. Each project will last 5 years and have no salvage value at the end. The company’s requiredrate of return for all investment projects is 9%. The cash flows of the projects are provided below.Project 1 Project 2Cost $175,000 $185,000Future Cash FlowsYear 1Year 2Year 3Year 4Year 576,00083,00067,00065,00055,00087,00078,00069,00065,00057,000Identify which project should the company accept based on simple pay back method if thepayback criteria is maximum 2 years.
Machinery Ltd is considering to invest in one of the two following Projects to buy a newequipment. Each project will last 5 years and have no salvage value at the end. The company’s requiredrate of return for all investment projects is 9%. The cash flows of the projects are provided below.Project 1 Project 2Cost $175,000 $185,000Future Cash FlowsYear 1Year 2Year 3Year 4Year 576,00083,00067,00065,00055,00087,00078,00069,00065,00057,000Identify which project should the company accept based on simple pay back method if thepayback criteria is maximum 2 years.
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 3CMA
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Machinery Ltd is considering to invest in one of the two following Projects to buy a new
equipment. Each project will last 5 years and have no salvage value at the end. The company’s required
Project 1 Project 2
Cost $175,000 $185,000
Future Cash Flows
Year 1
Year 2
Year 3
Year 4
Year 5
76,000
83,000
67,000
65,000
55,000
87,000
78,000
69,000
65,000
57,000
Identify which project should the company accept based on simple pay back method if the
payback criteria is maximum 2 years.
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