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Calculate the returns for each machine

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Reference no: EM133183933

Question - The incremental borrowing rate is 7%.

 

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Hugeblock

Cost

70 000

100 000

Net Cash Flows - Year 1

20 000

35 000

Net Cash Flows - Year 2

26 000

38 000

Net Cash Flows - Year 3

28 000

42 000

Residual (sell) value - end year 3

36 000

45 000

Required -

a) Calculate the returns (show workings) for each machine using the following methods: the accounting rate of return.

b) Advise which machine the company should invest in and why.

Reference no: EM133183933

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