Investec Plc is preparing its annual capital budget and is considering three projects, X, Y and Z. The following financial data relates to the projects. X Y K'm K'm K'm 700 Capital expenditure 800 900 Cash inflows Year 1 200 260 100 Year 2 240 260 220 Year 3 280 260 260 Year 4 240 260 300 Year 5* 200 300 200 NPV 78 110 96 Cash inflow in year 5 include K40m scrap value for each project. Invested uses 10% cost of capital to evaluate its investments. Required; a. Calculate the following i. Discounted payback period of all projects. i. Calculate the Internal Rate of Return of project Y and Z I. .Justify why the Payback Period and Accounting Rate of Return (ARR) methods are widely used in practice.
Investec Plc is preparing its annual capital budget and is considering three projects, X, Y and Z. The following financial data relates to the projects. X Y K'm K'm K'm 700 Capital expenditure 800 900 Cash inflows Year 1 200 260 100 Year 2 240 260 220 Year 3 280 260 260 Year 4 240 260 300 Year 5* 200 300 200 NPV 78 110 96 Cash inflow in year 5 include K40m scrap value for each project. Invested uses 10% cost of capital to evaluate its investments. Required; a. Calculate the following i. Discounted payback period of all projects. i. Calculate the Internal Rate of Return of project Y and Z I. .Justify why the Payback Period and Accounting Rate of Return (ARR) methods are widely used in practice.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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solve a( i,ii,iii) please for the image provided.
Transcribed Image Text:Question 2
Investec Plc is preparing its annual capital budget and is considering three projects, X, Y and
Z. The following financial data relates to the projects.
Y
K'm
K'm
K'm
Capital expenditure
800
900
700
Cash inflows
Year 1
200
260
100
Year 2
240
260
220
Year 3
280
260
260
Year 4
240
260
300
Year 5*
200
300
200
NPV
78
110
96
Cash inflow in year 5 include K40m scrap value for each project. Invested uses 10% cost of capital
to evaluate its investments.
Required;
a. Calculate the following
i.
Discounted payback period of all projects.
i.
Calculate the Internal Rate of Return of project Y and Z
. Justify why the Payback Period and Accounting Rate of Return (ARR) methods are widely
I.
used in practice.
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