The Roll Company Ltd is thinking about investing in a large machinery that
will see the company becoming one of the top companies within the
manufacturing industry. The following information relates to the proposed
machinery for investment:
Machine A
Machine B
Machine C
Initial investment in project
$90,000
$90,000
$90,000
Annual cash increase in operations:
Year 1
80,000
45,000
90,000
Year 2
10,000
45,000
0
Year 3
45,000
45,000
0
The company's cost of capital is 14%. Estimated useful life of each
project is
Required:
(a) Compute the following for each project:
(i) Payback period
(ii) Net present value
(iii) ARR
(iv) Profitability index