.1 Calculate the Payback Period (expressed in years, months and days). 5.2 Calculate the Accounting Rate of Return on average investment (expressed to two decimal places). 5.3 Identify TWO (2) reasons why the company should not use the accounting rate of return to evaluate capital investments. 5.4 Calculate the Net Present Value. 5.5 Calculate the Internal Rate of Return (expressed to two decimal places) if the net cash flows are R320 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation.
5.1 Calculate the Payback Period (expressed in years, months and days).
5.2 Calculate the Accounting Rate of
5.3 Identify TWO (2) reasons why the company should not use the accounting rate of
5.4 Calculate the
5.5 Calculate the
INFORMATION
Purchase price R1 000 000
Expected useful life 5 years
Scrap value 0
Minimum required rate of return 15%
Expected net
Year 1 R250 000
Year 2 R260 000
Year 3 R300 000
Year 4 R400 000
Year 5 R380 000
Expected net profit:
Year 1 R50 000
Year 2 R60 000
Year 3 R100 000
Year 4 R200 000
Year 5 R180 000
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