Finance Assignment | Professional Writing
Case 2 – Case Study – CIB Company A private company is considering investing in new IT machinery. The initial cost of would be AED 4,500 000 and also require AED 310,000 investment in working capital. The life would be 8 years, after which time the IT Machinery would have to be scrapped with no salvage value, at the end of 8 years, using the Straight Line method.
The management has come up with the following Revenues and Cost data for the next 8 years. Sales to its customers will amount to AED 540,000 for the next four years and then increase to AED 700,000 for the last four years. To raise funds for the project your company is proposing to raise a long-term loan at 13% interest rate per annum. You are told that there is an alterative project that could be invested in using the funds which has the following projected results: • Payback period = 7 years Net present value = AED 225,000 As funds are limited, investment can only be made in one project. Decide which project you will choose and why?
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