The IT Manager of Moriarty Marketing company is considering purchasing some new audio visual equipment

The IT Manager of Moriarty Marketing company is considering purchasing
some new audio visual equipment. Initial research has identified two possible
suppliers that can provide different equipment that will satisfy the requirements and
has given the following budget outlines on a cash basis:
The equipment will cost £50,000 to purchase and at the end of the period will have
zero residual value.
If the project geos ahead, it is predicted that the company will gain increased
revenue that has been projected as that shown in Table Q3a.
Year Revenue generated –
Supplier A (£)
Revenue generated –
Supplier B (£)
1 5,000 20,000
2 17,000 30,000
3 42,000 20,000
4 30,000 20,000
5 10,000 20,000
Table Q3a
You are required to determine for each supplier option:
The Payback Period.
The ARR (Average rate of Return)
Produce tables showing the relative cash flows that are relevant to each year that
can be used to determine these answers. It is assumed that the annual cash flows
shown in the table arise evenly throughout the year and that there are no tax,
depreciation or interest aspects to be considered.
Analyse your findings and make recommendations as to which supplier Moriarty
Marketing should choose from a financial perspective, using the answers from above
to support your argument (Maximum 150 words).
(6 marks)