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Nisha Sharma posted an Question
October 20, 2021 • 17:12 pm
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30 points
30 points
- UGC NET
- Commerce
Eduncle.com business finance illustration: andman limited is considering whether to purchase some special machines. management does not wish to buy the machines
Eduncle.com Business Finance Illustration: Andman Limited is considering whether to purchase some special machines. Management does not wish to buy the machines unless their cost can be recovered in three years. The following information is available (1) Cost of the machines Rs. 3,00,000; (2) Sales revenue generated by the new machines is Rs. 4,00,000; (3) Variable cost is 60% of sales; (4) Annual fixed costs other than depreciation are Rs. 15,000; (5) Life of the machines is 8 years and tax rate is 50%. Dased on the criterion of three year's recovery period, should the special machines be purchased? Support your answer with a computation of pay-back period required for the investment of Rs. 3,00,000 to be recovered. Solutior
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solution attached the proposal to purchase new special machine will be rejected because the pay back period of special machine is 3.28 years ,which is higher than 3 years desired limit of the company in the given situation