Projects Ltd intends to acquire a new machine costing £50,000 which is expected to have a life of five years, with a scrap value of £10,000 at the end of that time. Cash flows arising from operation of the machine are expected to arise on the last day of each year as follows:
|
End of year |
£ |
|
1 |
10,000 |
|
2 |
15,000 |
|
3 |
20,000 |
|
4 |
25,000 |
|
5 |
25,000 |
Calculate the payback period, the accounting rate of return and the net present value, explaining the meaning of each answer you produce.