Western Pte Ltd (“Western”) manufactures ready-to-eat meals. Western is evaluating: Management Accounting Assignment, RP

Question 3

Western Pte Ltd (“Western”) manufactures ready-to-eat meals. Western is evaluating whether to invest in a new packaging machine.

The table below shows the relevant cash flows from the investment.

Year
Cash flows

0
– $300,000

1
$110,000

2
$120,000

3
$108,000

4
See Note 1 below

* Note 1: This is equal to the last 6 (six) digits of your student ID. For example, if your student ID is 23100000, cash flow in Year 4 = $100,000

Western has a discount rate of 5% and wants to recover the cost of all investments within 3 years.

 

a) Calculate the Net Present Value and Payback Period for the above investment.

Based on the calculations for each tool, determine whether Western should invest in the new machine.

b) Marks will be awarded for Oral Questioning for this section. Please see marking criteria below.

Criteria
Marks Allocated
Description

Data and Calculations
11 marks
·         Able to calculate the Net Present Value and Payback Period for the investment.

·         Correct explanations on whether the company should invest in the new machine.

Oral Questioning
2 marks
·         Ability to answer lecturer’s questions

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