資本投資評估：練習題

A company is evaluating two mutually exclusive projects, Project X and Project Y. Project X requires an initial investment of $$500,000$$ and is expected to generate net present values (NPV) of $$70,000$$ at a $$10\%$$ discount rate. Project Y requires an initial investment of $$400,000$$ and is expected to generate NPV of $$90,000$$ at the same $$10\%$$ discount rate. Both projects have a lifespan of 5 years. Based solely on the NPV method, which project should the company choose?

A project has an initial investment of $$100,000$$ and is expected to generate net cash inflows of $$30,000$$ in Year 1, $$40,000$$ in Year 2, and $$50,000$$ in Year 3. What is the payback period for this project?

What does a project's Net Present Value (NPV) of $$-HK\$50,000$$ signify for a company's investment decision?

Explain one significant limitation of the payback period method and one key advantage of the Net Present Value (NPV) method when appraising capital investment projects.

Explain two reasons why the Net Present Value (NPV) method is generally considered superior to the Payback Period method for capital investment appraisal.

Eco-Clean Solutions Ltd. manufactures environmentally friendly cleaning products. The company is evaluating the purchase of a new automated bottling machine, 'Machine A', which is expected to increase production efficiency. The relevant details are as follows:

Initial Investment: \(HK\$480,000\)
Expected Useful Life: 4 years
Estimated Net Cash Inflows:
Year 1: \(HK\$150,000\)
Year 2: \(HK\$180,000\)
Year 3: \(HK\$160,000\)
Year 4: \(HK\$140,000\)
Salvage Value at the end of Year 4: \(HK\$40,000\)

The company's cost of capital is 10%.

Present Value Factors at 10%:
Year 1: 0.909
Year 2: 0.826
Year 3: 0.751
Year 4: 0.683

(a) Calculate the Payback Period for Machine A.

(b) Calculate the Net Present Value (NPV) of Machine A.

(c) Based on your calculations, should Eco-Clean Solutions Ltd. invest in Machine A? Justify your decision financially.

(d) State and briefly explain one non-financial factor that Eco-Clean Solutions Ltd. should consider before making the final investment decision.