Corporate Finance Assignment Example | Topics and Well Written Essays - 750 words

Corporate Finance - Assignment Example According to the analysis made, the LCC project proves more viable considering its profitability index, which improves on the meaning of the net present value and the payback period. Under this project, the company waits for less than two years for the machine to start gathering revenue while the HCC machine takes up to three years. Considering possibilities of risk, the HCC machine takes even longer yet the LCC machine still maintains the payback period frame. It is recommendable for the company to invest in the LCC project machine. Based on the Net Present Value, Internal Rate of Return, Profitability Index and the Pay Back Period of the two projects considered separately, the project that utilizes the LCC machine is more appropriate. The criterion above aim at evaluating the aspects that relate to time value for money (Steve, Jenkins and Sawyers, 2008). Considering the fact that it has a more positive NPV and it has a shorter Pay Back Period makes it a more worth project compared to the one that uses the HCC. The difference in life spans of the project makes machine HCC look more appropriate but the fact that the machine is so expensive and yet the impact it has on the revenue is meager makes it an expensive machine for the company to aim for. Considering that, inflation is part of the value for money makes the machine attractive since the more the company uses it the more it earns back. Recommendation best for the company in relation to the table is for them to buy the LCC machine. The LCC machine has the company recover its money back in less than two years while the HCC gives the company 3 years for it to recover their money back. Once the life span of the LCC machine is used up, the salvage value is still attractive enough to help the company purchase another machine and proceed with the project. Considering aspects of interest and the loan used