Solution-Calculate the returns for each machine

Calculate the returns for each machine

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Reference no: EM133183933

Question - The incremental borrowing rate is 7%.

	Bigblock	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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Calculate the returns for each machine

Reference no: EM133183933

Reference no: EM133183933

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