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Question No 4(with answer) on Basic Capital Investment Decisions or Investment Appraisal Techniques

Below is a simple question and answer to illustrate on the basic capital investment appraisal technique re: NPV,cost of capital and treatment of inflation:-

November 23, 2009  Tags: Capital Investment Appraisal Questions  Posted in: Capital Investment Appraisal  No Comments

Capital Investment Appraisal Test Question & Answer CAP1

Company ABC has developed a new product for which a growing demand is anticipated.

Yearly Sales Trend

Units

1 st year

20,000

2 nd year

30,000

3 rd year

50,000

4 th year onwards

80,000

Company ABC need to choose between 2 alternative production arrangements:
(a) Buy a large machine with a capacity of 90,000 units and an estimated useful life of 6 years. The machine [...]

December 3, 2007  Tags: Capital Investment Appraisal Questions  Posted in: Test Question Bank  No Comments

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