AEEE 162- Engineering Economy

Assignment
A new machine has been developed by an Engineering student to produce a Brandy the Canon. It requires an investment of $ 500,000 immediately. Financed can be obtained as follows:

Proposal A $ Ordinary shares 300,000

Proposal B $ 250,000 150,000 100,000

Proposal C $ 100,000 100,000 300,000

8% Preference shares 200,000 6% Debentures ___

You are informed that the ordinary shareholders would anticipate a return of 10% for Proposal A, 12% for Proposal B, and 20% for Proposal C. The rate for Corporation Tax is 10%. The Canon project will have the following cash inflows: $
Year 1 Year 2 Year 3 Year 4 Year 5 120,000 140,000 140,000 160,000 150,000

It is expected that 20% of each years cash flow will be equal to the cash outflows. Required: Evaluate the Canon project with as many project appraisal techniques you know, taking into consideration the three alternative proposals of finding finance. You should also mention any potential problems derived by the three alternative proposals for getting finance.

Note: The assignment must be typed marks will be awarded for clarity.