The directors of Makeit Ltd. Propose to buy a machine costing $300,000. At the end of 5 years the machine will be sold for $ 50,000. In each of the 5 years the machine will increase revenue by $160,000. Increased annual expenditure of $ 80,000 will be incurred. Makeit Ltd. will require an increase in working capital of $40,000. Machinery is depreciated on the straight line method."

Required
a) Calculate the accounting rate of return (ARR) which will result if the machine is purchased.
b) Calculate the discounted payback period for the machine. (Discount rate =10%)
c) i) Calculate the IRR
ii) State with reasons whether the directors should purchase the machine.
d) State the advantages and disadvantages of using the following methods:
1) ARR
ii) payback period
ii)IRR"

Evaluates a capital budgeting decision (purchase of a machine) using Accounting Rate of Return, Payback period and Internal Rate of Return. Also lists the advantages and disadvantages of using Accounting Rate of Return, Payback period, Internal Rate of Return.

Clegg is replacing one of his machines. He can choose between machine A or machine B. Details of the machines are as follows... Please see attached.
Required:
a) Calculate the accountingrate of return (ARR) for each machine.
b) Calculate the payback period for each machine.
c) Calculate the net present value (NPV) of

You're analyzing a project and have completed this info:
Year...............Cash Flow
0....................$-158,000
1....................$34,500
2....................78,500
3....................92,000
Required payback period 2.5 years
Required return 12%
Should the proposed project be accepted based on its i

Suppose a risk less project requires an initial investment of $10 and will generate a one-time cash inflow of $30 two years later. Assuming a risk-free interest rate of 5%, which of the following statements about the project is FALSE?
1. The net present value of the project is positive
2. The IRR is greater then 50 percent
3.

Project K costs $52,125, its expected net cash inflows are $12,000 per year for 8 years, and its WACC is 12%.
a) What's the project's NPV?
b) What's the project's IRR?
c) What's the project's MIRR?
d) What's the project's payback?
e) What's the project's discounted payback?

14. Given the following cash flows and a cost of capital of 14%, calculate
a. Payback period
b. Net Present Value
c. Internal Rate of Return
d. MIRR.
TIME ATCF
0 -160
1 +200
2 + 45
3 +200
4 +100
5 + 50
Should we undertake this project? Why?

Sea Cable Industries is a company involved in the manufacture of marine cables. The company is planning a move into land lines to exploit new telecommunications opportunities. This will involve the acquisition of new equipment. Two machines have been identified and the returns involved in purchasing each are as follow:

Project SS costs $52,125, its expected net cash flows are $12,000 per year for 8 years, its WACC is 12%.
What is the project's NPV?
IRR?
MIRR?
Payback Period?
Discounted Payback Period?
(Show calculations)

Consider an investment that costs $100,000 and had a cash inflow of $25,000 every year for 5 years. The required return is 9% and required payback is 4 years.
Wwhat is the payback period?
What is the discounted payback period?
What is the NPV?
What is the IRR?
Should we accept this project?
What decision rule should b

Consider the following potential investment, which has the same risk as the firm's other projects:
Time Cash Flow
0 -$75,000
1 $10,000
2 $16,000
3 $18,000
4 $18,000
5 $18,000
6 $20,000
a) What are the investment's paybackperiod,IRR, and NPV, assuming the firm's WACC is 10%.
b) If the firm requires a payback period

Three Rivers Company runs clothing stores in the Pittsburgh area. Three Rivers' management estimates that if it invests $250,000 in a new computer system, it can save $75,000 in annual cash operating costs. The system has an expected useful life of ten years and no terminal disposal value. The required rate of return is 8%. I