Question

Example 4: A company is considering undertaking a project which
g alternative will be feasible for the
would cost 1,000 and would have a zero scrap value at the end of its 3
sists of the acquisition and operation of machine The machine
operating costs). pre-tax:
It is expected to produce the following net cash flows (ie, revenues less
The machine could either be bought outright
lease. Purchase would be made through
1490 interest, secured against the machine (which has a 60% debt
capacity), together with 400 of retained earnings. The lease agreement
requires three payments of 320, paid annually in advance.
previous accounting year and the company expects to have a corporate
Assume that all initial transactions are made on the last day of the
tax liability throughout the next three years. It is thought that the project
is required to produce an after-tax return of atleast 20% to make it
acceptable. This can be assumed to represent an adequate base-case
Writing down allowances of 25% on the reducing balance is available
Corporation tax is charged at 35%, payable 12 months in arrears.
hunery is more than present value of
25.00.000
10
year
Year
1
500
200
or acquired via a financial
a 600 for 3 year term loan at
discount rate.
on capital expenditure,​

Answer 1

Answer:

hvcshhccvgyhhvswtujbcddhvxsdgj