The management of Fine Electronics Company is considering to purchase an equipment to be attached with the main manufacturing machine. The equipment will cost Gh¢6,000 and will increase annual cash inflow by Gh¢2,200. The useful life of the equipment is 6 years. After 6 years it will have no salvage value. The management wants a 20% return on all investments. a. Compute net present value (NPV) of this investment project. b. Should the equipment be purchased according to NPV analysis?
The management of Fine Electronics Company is considering to purchase an equipment to be attached with the main manufacturing machine. The equipment will cost Gh¢6,000 and will increase annual cash inflow by Gh¢2,200. The useful life of the equipment is 6 years. After 6 years it will have no salvage value. The management wants a 20% return on all investments. a. Compute net present value (NPV) of this investment project. b. Should the equipment be purchased according to NPV analysis?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...
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![Question
1. The management of Fine Electronics Company is considering to purchase an equipment to be attached
with the main manufacturing machine. The equipment will cost Gh¢6,000 and will increase annual
cash inflow by Gh¢2,200. The useful life of the equipment is 6 years. After 6 years it will have no
salvage value. The management wants a 20% return on all investments.
a. Compute net present value (NPV) of this investment project.
b. Should the equipment be purchased according to NPV analysis?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9958cb8a-9287-496c-bcd1-97e576489eaa%2F9e4d3bf4-d02a-462d-82dd-bb8ebf278c8a%2Fmpbz1k_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question
1. The management of Fine Electronics Company is considering to purchase an equipment to be attached
with the main manufacturing machine. The equipment will cost Gh¢6,000 and will increase annual
cash inflow by Gh¢2,200. The useful life of the equipment is 6 years. After 6 years it will have no
salvage value. The management wants a 20% return on all investments.
a. Compute net present value (NPV) of this investment project.
b. Should the equipment be purchased according to NPV analysis?
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