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As the financial manager of Soloi Ltd, you are required to analyse two proposed capital investments, namely Projects 02AD and 02ZT. 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 1 2 3 4 Required: Project 02AD R40 000 R5 000 R5 000 (R15 000) Project 02ZT R10 000 R10 000 R10 000 R10 000                1. Calculate the payback period for each project. 2. Calculate the net present value for each project. 3. Determine which project should be chosen (Based on 2 above). 4. Calculate the internal rate of return for project 02ZT.

As the financial manager of Soloi Ltd, you are required to analyse two proposed capital investments, namely Projects 02AD and 02ZT. 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 1 2 3 4 Required: Project 02AD R40 000 R5 000 R5 000 (R15 000) Project 02ZT R10 000 R10 000 R10 000 R10 000                1. Calculate the payback period for each project. 2. Calculate the net present value for each project. 3. Determine which project should be chosen (Based on 2 above). 4. Calculate the internal rate of return for project 02ZT.

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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As the financial manager of Soloi Ltd, you are required to analyse two proposed capital investments, namely Projects 02AD and 02ZT. 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

1 2 3 4

Required:

Project 02AD

R40 000 R5 000 R5 000 (R15 000)

Project 02ZT

R10 000 R10 000 R10 000 R10 000

               1. Calculate the payback period for each project.

2. Calculate the net present value for each project.

3. Determine which project should be chosen (Based on 2 above). 4. Calculate the internal rate of return for project 02ZT.

18:06 Notes 03 April 2023 at 18:06 As the financial manager of Soloi Ltd, you are required to analyse two proposed capital investments, namely Projects 02AD and 02ZT. 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 1234 Required: Project 02AD R40 000 R5 000 R5 000 (R15 000) Project 02ZT R10 000 R10 000 R10 000 R10 000 OO LTE 974 1. Calculate the payback period for each project. 2. Calculate the net present value for each project. 3. Determine which project should be chosen (Based on 2 above). (3) 4. Calculate the internal rate of return for project 02ZT. O ●●●
Transcribed Image Text:18:06 Notes 03 April 2023 at 18:06 As the financial manager of Soloi Ltd, you are required to analyse two proposed capital investments, namely Projects 02AD and 02ZT. 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 1234 Required: Project 02AD R40 000 R5 000 R5 000 (R15 000) Project 02ZT R10 000 R10 000 R10 000 R10 000 OO LTE 974 1. Calculate the payback period for each project. 2. Calculate the net present value for each project. 3. Determine which project should be chosen (Based on 2 above). (3) 4. Calculate the internal rate of return for project 02ZT. O ●●●
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