Question

A corporation is faced with a choice between two machines, Beta
and Zeta, both of which are designed to improve operations by saving on labour costs. Beta costs $20, 000 and will generate an annual
labour savings of $6, 000. Zeta costs $22, 000 and will save $6, 500
annually. Beta has a useful life of 5 years and Zeta has a useful life
of 6 years. Assuming that cost of capital is 11% per annum, and
zero salvage value for both machines, which machine is preferable,
and why?

please maths experts need help asap

Answer 1

Answer:

Step-by-step explanation:

End of Year Cash Flow In Cash Flow Out

1 0 500,000

2 300,000 90,000

3 400,000 100,000

4 100,000 175,000

5 50,000 35,000

1. What is the payback period for this project?

A. One year

B. Two years

C. Three years

D. Four years

(Ans.: C)

Explanation:

End of Year Cash Flow In Cash Flow Out Net (Yearly) Net (overall)

1 0 500,000 (500,000) (500,000)

2 300,000 90,000 210,000 (290,000)

3 400,000 100,000 300,000 10,000

4 100,000 175,000 (75,000) (65,000)

5 50,000 35,000 15,000 (50,000)

2. What is the net cash flow at the end of five years?

A. $50,000

B. -$50,000

C. $850,000

D. $100,0(Ans.: B)

Explanation: -$50,000 (Last cell in 5th column)00