Tin Ltd. is a manufacturer of aluminium products. The company is currently investigating two projects for expansion. The two projects are mutually exclusive, that is the company can only undertake one of these and has for your advice in deciding which one to proceed
Increase production at the existing factory.
Cost of new machinery (life span of 10 years) - $1 850,000
Additional annual revenue for the 10 year life of the project - $770,000
Annual fixed cost including depreciation - $555,000
Annual variable costs $40,000
Depreciation was charged on a straight line basis
Investment 2 -Set up a new manufacturing facility
Initial outlay of the facility - $4,615,390
Annual profits (for each of the 10 years) $1,046,160
Annual depreciation on equipment $130,770
Tin Ltd. cost of capital is currently at 12 percent and the company pays tax at the rate of 35percent.
a) Advise Tin Ltd. which investment project they should undertake.
2 hours ago - 3 days left to answer