Nchanga Demolishers LimitedNchanga Demolishers Limited intends purchasing a new demolishing machine. Thefollowing information relating to the machine is available.Cost of machineExpected useful lifeScrap valueMethod of depreciationCost of CapitalK120, 000,0006 yearsK80, 000,000Straight line14%Profit2,000,0006,000,00038,000,000|22,000,00042,000,000YearCash flow120,000,00024,000,00056,000,00040,000,00060,000,00035Q1.a) What are relevant costs in investment appraisal decision making?b) Contrast between payback period and accounting rate of return (ARRc) Using the information in the case study above calculate the following :i)Payback period for the new machine in months.ii)Net present value (NPV) for the new machine and advise if NchangaDemolishers Limited should invest in this machine.

a. In an investment appraisal, the relevant costs refer to all the additional costs that are…

Nchanga Demolishers Limited Nchanga Demolishers Limited intends purchasing a new demolishing machine. The following information relating to the machine is available. K120, 000,000 6 years K80, 000,000 Straight line 14% Cost of machine Expected useful life Scrap value Method of depreciation Cost of Capital Year Cash flow Profit 20,000,000 24,000,000 56,000,000 40,000,000 60,000,000 2,000,000 6,000,000 38,000,000| 22,000,000 42,000,000 1 2 3 4 5 Q.1. a) What are relevant costs in investment appraisal decision making? b) Contrast between payback period and accounting rate of return (ARR. c) Using the information in the case study above calculate the following : i) Payback period for the new machine in months. i1) Net present value (NPV) for the new machine and advise if Nchanga Demolishers Limited should invest in this machine.

Nchanga Demolishers Limited Nchanga Demolishers Limited intends purchasing a new demolishing machine. The following information relating to the machine is available. K120, 000,000 6 years K80, 000,000 Straight line 14% Cost of machine Expected useful life Scrap value Method of depreciation Cost of Capital Year Cash flow Profit 20,000,000 24,000,000 56,000,000 40,000,000 60,000,000 2,000,000 6,000,000 38,000,000| 22,000,000 42,000,000 1 2 3 4 5 Q.1. a) What are relevant costs in investment appraisal decision making? b) Contrast between payback period and accounting rate of return (ARR. c) Using the information in the case study above calculate the following : i) Payback period for the new machine in months. i1) Net present value (NPV) for the new machine and advise if Nchanga Demolishers Limited should invest in this machine.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

22nd Edition

ISBN:9781305666160

Author:James A. Heintz, Robert W. Parry

Publisher:James A. Heintz, Robert W. Parry

Chapter18: Accounting For Long-term Assets

Section: Chapter Questions

Problem 3CE

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Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. Dunedin buys equipment frequently and wants to print a depreciation schedule for each assets life. Review the worksheet called DEPREC that follows these requirements. Since some assets acquired are depreciated by straight-line, others by units of production, and others by double-declining balance, DEPREC shows all three methods. You are to use this worksheet to prepare depreciation schedules for the new machine.
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