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The building and machinery will cost 800000 and be


You are considering purchasing a new production facility in order to expand operations. The building and machinery will cost $800,000 and be depreciated over 10 years using the straight-line method with no salvage value at the end of the equipment-life. You require a 12% rate of return on the project.

The cost and revenue information follows in the table below

Determine the NPV of the new facility.

Calculate the IRR (approximate).

Calculate the payback period.

Calculate the accounting rate of return.

Taking into considerations all of the calculations above, will you invest in the new production facility? Why or why not? What nonfinancial information will you consider in your decision?

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Accounting Basics: The building and machinery will cost 800000 and be
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The solution was a part of capital budgeting decision. The decision was to take new machinery. Since NPV of the project was positive, so it is feasible to go for it. However in some cases, non-financial information is also be taken into consideration.

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