Required:
1. Compute the project profitability index for each investment proposal.
2. Rank the proposals in terms of preference.
EXERCISE 13-6 Simple Rate of Return Method [LG 13-6]
The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $120,000. The machine would replace an old piece of equipment that costs $30,000 per year to operate. The new machine would cost $12,000 per year to operate. The old machine currently in use could be sold now for a scrap value of $40,000. The new machine would have a useful life of 10 years with no salvage value.
Required:
Compute the simple rate of return on the new automated bottling machine.
EXERCISE 13-7 Net Present Value Analysis of Two Alternatives [L013-2]
Perit ỉndusưies has $100,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: