Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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You are working as a finance manager for Fire Fox Transport Ltd. The company is considering to invest in one of the two following projects to buy a new equipment for their storage which is expected to boost the company’s revenue. Each equipment will last 5 years and have no salvage value at the end. The company’s required
|
Equipment 1 |
Equipment 2 |
Cost |
$157,000 |
$182,000 |
Future Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 |
67 000 82 000 78 000 64 000 56 000 |
83 000 94 000 80 000 77 000 73 000 |
Required:
- Identify which option of equipment should the company accept based on
Net Present Value (NPV) method? - Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 3 years?
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