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GreenEnergy Co. is considering three solar panel machines for purchase. The details are as follows. Assume...

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Accounting

  • GreenEnergy Co. is considering three solar panel machines for purchase. The details are as follows. Assume a tax rate of 28% and an interest on capital of 12%.

Particulars

Machine Sun (?)

Machine Star (?)

Machine Moon (?)

Initial investment

3,50,000

3,00,000

4,50,000

Estimated annual sales

5,50,000

5,00,000

6,00,000

Cost of production:




Direct material

50,000

40,000

60,000

Direct labour

60,000

50,000

70,000

Factory overhead

70,000

60,000

80,000

Administration cost

35,000

25,000

45,000

Selling & Distribution cost

20,000

15,000

25,000

  • The economic life of machine Sun is 3 years, while it is 2 years for the other two. The scrap values are ?45,000, ?35,000, and ?25,000 respectively. Use the payback period method to find the best investment.

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