Business & Management For Engineers 2.

**Investment Appraisal **1. As a company you are considering investing in a new machining centre for your manufacturing facility. The machine is an automated lathe with centre drilling and cross drilling facilities and can be either programmed automatically by the operator or offline via a DNC link to a CAM system. This machine will offer significant flexibility to the manufacturing for a specific product development project. The initial capital expenditure is £60,000 combined with a £5,000 increase in working capital. The project has an expected duration of four years. After this period the working capital is expected to be fully recovered and the machine to have a scrap value of £10,000. The straight line method of depreciation is used and the company expects a return on capital employed of at least 17.5%. The project net pre tax cash flows are as follows: Year Net Cash Flow (£) 1 30,000 2 40,000 3 25,000 4 15,000 [login to view URL] both the accounting rate of return on the total investment method and the accounting rate of return on the average investment technique, calculate the rate of return which this project is expected to produce for the organisation. [login to view URL] the company on whether the machine should be purchased. ## Deliverables **Investment Appraisal **1. As a company you are considering investing in a new machining centre for your manufacturing facility. The machine is an automated lathe with centre drilling and cross drilling facilities and can be either programmed automatically by the operator or offline via a DNC link to a CAM system. This machine will offer significant flexibility to the manufacturing for a specific product development project. The initial capital expenditure is £60,000 combined with a £5,000 increase in working capital. The project has an expected duration of four years. After this period the working capital is expected to be fully recovered and the machine to have a scrap value of £10,000. The straight line method of depreciation is used and the company expects a return on capital employed of at least 17.5%. The project net pre tax cash flows are as follows: Year Net Cash Flow (£) 1 30,000 2 40,000 3 25,000 4 15,000 [login to view URL] both the accounting rate of return on the total investment method and the accounting rate of return on the average investment technique, calculate the rate of return which this project is expected to produce for the organisation. [login to view URL] the company on whether the machine should be purchased. ## Platform Windows XP