INVESTMENT APPRAISAL

Investment Appraisal

Investment Appraisal

Time line

0

1

2

3

4

5

6

Machine A

- 2000000

300000

460000

800000

600000

500000

580000*

Present value of inflows

-2000000

260870

347826

526013

343052

248588

250750

Net present value

-22,901

Internal Rate of return

15%

Payback period

1

1

1

0.77

3.77

Years

Machine B

-1100000

170000

240000

380000

390000

400000

440000*

Present value of inflows

-1100000

147826

181474

249856

222984

198871

190224

Net present value

91235

Internal Rate of return

18%

Payback period

1

1

1

0.79

3.79

Years

Machine C

-800000

140000

250000

300000

330000

240000

160000*

Present value of inflows

-800000

121739

189036

197255

188679

119322

69172

Net present value

85203

Internal Rate of return

19%

Payback period

1

1

1

0.33

3.33

Years

* Last revenue + scrap valueRequirement

The requirement of this investment appraisal is to suggest the manager about investing in three alternative options that Colour Printing Limited has. The company has considered three options of investment (Machine A, Machine B and Machine C) and these options have different cash inflows and outflows.

Discussion

According to the above analysis, the present value of all cash flows (Net Present ...