Decision concerning the acquisition of new machining tool

Assignment Help Financial Management

Reference no: EM131983198

XYZ is a company located in Italy, the company manufactures machine parts. It is currently involved in making a decision concerning the acquisition of new machining tool. Two different versions of the tool are available: X AND Y. The forecasted cash flows of the two alternative are listed below; XYZ normally uses payback with a 3-year criterion. NET CASH FLOWS ($000s) Tool X Year 0 -1000, Year 1 +400, Year 2 +600, Year 3 +187, Tool Y Year 0 -450, Year 1+300, Year 2+150, Year 3+106. XYZ faces a perfect capital market, in which the interest rate for the projects' risk level is 5%. Required: (a) Using the Payback and the IRR decisions rule, indicate which projects the company should accept and state clearly the reasons for your decisions. (b) How would your conclusions in (a) will change if the projects were mutually exclusive? (c) State clearly any limitations and assumptions that you made in your calculations.

Reference no: EM131983198

Questions Cloud

Consider the market for a type of cooling lubricant : For the next four questions, consider the market for a type of cooling lubricant used in manufacturing small electronic components.

Identify a problem that you believe needs to be fixed : Identify a problem that you believe needs to be fixed (which you have done in the first assignment) and then laying out your ideas for what needs to be done.

Different slope than the domestic demand for goods curve : Explain why the demand for domestic goods curve (ZZ) has a different slope than the domestic demand for goods curve (DD).

What are some traits and events associated with livia : What are some traits and events associated with Livia? Discuss specific examples from your documentary and lecture. Answer in at most 250 words.

Decision concerning the acquisition of new machining tool : It is currently involved in making a decision concerning the acquisition of new machining tool

Integrated way that has long-term impact : In order to counteract income inequality, it's essential to tackle poverty in an integrated way that has long-term impact. We need to give people the capacity.

Healthcare executive looking to invest : Looking at Latin America what is one country you would pressure and one you would avoid avoid as an healthcare executive looking to invest.

Statements for company-spontaneously generated funds : In creating pro forma financial statements for a company, spontaneously generated funds. Relying on capital intensity ratio would allow company to estimate.

Identify what specific factors make latin america : Identify what specific factors make Latin America an attractive or unattractive region in which to invest in the coming years.

User Account

All Pages