Port Phillip Fisheries Need a New Navigation System for Their

question 136

Essay

Port Phillip Fisheries need a new navigation system for their fishing boat.They have received three proposals,with related facts as follows:
$$\begin{array} { | l | r | r | r | } \hline & { \text { Proposal A } } & \text { Proposal B } & { \text { Proposal C } } \\\hline \text { Initial investment in equipment } & \$ 90000 & \$ 90000 & \$ 90000 \\\hline \begin{array} { l } \text { Annual cash increase in } \\\text { operations: }\end{array} & & & \\\hline \text { Year 1 } & 80000 & 45000 & 90000 \\\hline \text { Year 2 } & 1000 & 45000 & 0 \\\hline \text { Year 3 } & 45000 & 45000 &0 \\\hline \text { Salvage value } &0 & 0& 0 \\\hline \text { Estimated life } & 3 \mathrm { yrs } &3 \mathrm { yrs } &1 \mathrm { yr } \\\hline\end{array}$$
The company uses straight-line depreciation for all capital assets.
Required:
a.Compute the payback period,net present value,and accrual accounting rate of return with initial investment,for each proposal.Use a required rate of return of 14%.
b.Rank each proposal 1,2,and 3 using each method separately.Which proposal is best? Why?
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Definitions:

Legislation

Laws and statutory regulations enacted by a government's legislative branch.

Durability

The ability of a product or material to withstand wear, pressure, or damage; its quality of being long-lasting or enduring.

Improperly Fired

Refers to a termination of employment that violates either legal statutes or contractual terms.

Botulism Poisoning

A rare but serious illness caused by a toxin that attacks the body’s nerves and can result in difficulty breathing, muscle paralysis, and even death.