Use the information below to answer the following questions.
Han Ltd supplies chilli paste to large supermarket chains. The company is currently considering scrapping its old processor and investing in a new processor. Information about the investment is as follows:
-Refer to the table above. Using the net present value approach, the management of Han Ltd will make which of the following decisions?

Question

Use the information below to answer the following questions.
Han Ltd supplies chilli paste to large supermarket chains. The company is currently considering scrapping its old processor and investing in a new processor. Information about the investment is as follows: 
-Refer to the table above. Using the net present value approach, the management of Han Ltd will make which of the following decisions?

Quizplus · Accepted Answer

Based on the net present value approach, the investment will bring a positive net present value of $31,000, which means that the investment will provide value to Han Ltd's shareholders. Therefore, the best decision is to accept the investment proposal and purchase the new processor. Options A and B are incorrect as they do not take into account the potential positive impact of the investment. Option D is also incorrect as it will result in unnecessary expenditure on two processors while the new one can fulfil the needs of the company.

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