(a(i))[5]
Calculate the accounting rate of return (ARR) for the new machine.
(a(ii))[3]
Calculate the net present value (NPV) for the new machine.
(a(iii))[4]
Calculate the internal rate of return (IRR) for the new machine.
(b)[3]
Advise the directors on whether they should buy the new machine or not. Justify your answer.
(c)[3]
State three advantages of employing the NPV method.
(d)[2]
Explain how the change in the cost of capital affects the directors’ investment decision.
(e)[5]
Calculate the smallest rise in sales revenue in year 3 needed to support the directors’ decision to buy the new machine.