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CAPITAL BUDGETING TECHNIQUES The financial manager of EM Limited is required to analyse two proposed cap namely Projects N and O. Each has a cost of R100 000, and the cost of capita is 12%. Depreciation on each project is estimated at R25 000 per yea expected net profit (loss) are as follows:

CAPITAL BUDGETING TECHNIQUES The financial manager of EM Limited is required to analyse two proposed cap namely Projects N and O. Each has a cost of R100 000, and the cost of capita is 12%. Depreciation on each project is estimated at R25 000 per yea expected net profit (loss) are as follows:

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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CAPITAL BUDGETING TECHNIQUES The financial manager of EM Limited is required to analyse two proposed capital investments, namely Projects N and O. Each has a cost of R100 000, and the cost of capital for each project is 12%. Depreciation on each project is estimated at R25 000 per year. The projects expected net profit (loss) are as follows: Year Project N Project O 1 R40 000 R10 000 R5 000 R10 000 R5 000 R10 000 4. (R15 000) R10 000 Questions: (4 1.1 Calculate the payback period for each project. 1.2 Calculate the net present value for each project. 1.3 Determine which project should be chosen based on 1.2 1.4 Calculate the internal rate of return for project N.
Transcribed Image Text:CAPITAL BUDGETING TECHNIQUES The financial manager of EM Limited is required to analyse two proposed capital investments, namely Projects N and O. Each has a cost of R100 000, and the cost of capital for each project is 12%. Depreciation on each project is estimated at R25 000 per year. The projects expected net profit (loss) are as follows: Year Project N Project O 1 R40 000 R10 000 R5 000 R10 000 R5 000 R10 000 4. (R15 000) R10 000 Questions: (4 1.1 Calculate the payback period for each project. 1.2 Calculate the net present value for each project. 1.3 Determine which project should be chosen based on 1.2 1.4 Calculate the internal rate of return for project N.
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