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Assuming directors of Unilever PLC have decided to purchase a new machine to enhance the capacity to benefit from the expected increase in demand of their two products, ‘Personal Care’ and ‘Home Care’. Two versions of machines are available from different manufacturers at the same cost of € 600M. Both machines have six years useful life and will be sold at estimated price of € 60M at the end of sixth year. The company will use straight line method for
Further information regarding net cash inflow from both machines is provided below:
Personal Care
Home Care Years-->Cashflow(€M)-->Cashflow(€M)
0--> (600)--> (600)
1--> 300--> 95
2-->250--> 100
3-->200-->150
4--> 150-->200
5--> 100 -->250
6--> 95 -->300
Task 2A:
You are required to calculate (2-decimal places) using the following investment appraisal techniques, and provide recommendations as to the economic feasibility of acquiring the suitable machine:
a. The Payback Period.
b. The Discounted Payback Period.
c. The Accounting
d. The
e. The
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