Triangle PLC is a manufacturer of a computer components and a decision required on a proposal to invest

Question

Triangle PLC is a manufacturer of a computer components and a decision required on a proposal to invest

1800,000

on a new machine in order to move into a new market for components the financial details are as follows.

Initial Investment- 1,800,000

Life of Project-10 years

Net Cash Flows- Years 1-6 years 500,000 per year

Net Cash Flows- Years 7-10 years 300,000 per year

Residual Value- 500,000

A. Caclulate the pay back period.

B. Calculate the projects net present value.

C. Advise the company on whether it should proceed with the project and provide reasons for your advice.

Finance