Note: Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appearafter QUESTION 5.REQUIREDUse the information given below to calculate the following:5.1 Payback Period of both projects (expressed in years, months and days)5.2Net Present Value of both projects5.3 Accounting Rate of Return (on average investment) of Project Ron (expressed to twodecimal places)Internal Rate of Return (IRR) of Project Hob. Your answer must include the calculationof two net present values as well as the determination of the IRR expressed to twodecimal places.INFORMATION5.4Trendy Manufacturers is investigating the possibility of investing in one of two projects. The net cash flowsfor the two competing investment opportunities are as follows:Year12345Project RonR560 000R500 000R400 000R200 000R50 000Project HobR340 000R340 000R340 000R340 000R340 000Each project requires an initial investment of R1 200 000. A scrap value of R50 000 (not included in thefigures above) is expected for Project Ron only. The required rate of return is 12%. The estimated averageannual profits of Project Ron and Project Hob are R112 000 and R100 000 respectively.

Hi studentSince there are multiple subparts asked, we will answer only first three subparts.Capital…

Note: Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. REQUIRED Use the information given below to calculate the following: 5.1 Payback Period of both projects (expressed in years, months and days) 5.2 Net Present Value of both projects 5.3 Accounting Rate of Return (on average investment) of Project Ron (expressed to two decimal places)

Note: Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. REQUIRED Use the information given below to calculate the following: 5.1 Payback Period of both projects (expressed in years, months and days) 5.2 Net Present Value of both projects 5.3 Accounting Rate of Return (on average investment) of Project Ron (expressed to two decimal places)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cash flows of two different investment projects are given in the table. Table 1. Cash flows from two investments (in dollars) 1 2 3 project/year -2500 1000 1500 1000 Project A Project B -2500 -1000 2500 2000 Calculate the Net Present Value of the projects by assuming the desired profit rate of 10%.
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QUESTION 2 REQUIRED Use the information given below to calculate the following: 2.1 Payback Period of Project B (answer expressed in years, months and days). 2.2 Accounting Rate of Return (on average investment) of Project B (answer expressed to two decimal places). 2.3 Net Present Value of Project A (amounts rounded off to the nearest Rand.) 2.4 Internal Rate of Return of Project B, if the net cash flows are R120 000 per year for five years (answer expressed to two decimal places). INFORMATION The following information relates to two capital investment projects: Project A Project B Initial cost R400 000 R400 000 Expected useful life 5 years 5 years Scrap/Residual value R40 000 Depreciation per year R72 000 R80 000 Expected annual profits: R R End of: Year 1 100 000 45 000 Year 2 60 000 45 000 Year 3 50 000 45 000 Year 4 30 000 45 000 Year 5 20 000 45 000 The company estimates that its cost of capital is 15%.
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Garage, Inc., has identified the following two mutually exclusive projects: Year -$ 29,100 14,500 12,400 9,250 5,150 Cash Flow (A) Cash Flow (B) -$ 29,100 4,350 9,850 15,300 16,900 a-1 What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) IRR Project A % Project B % a-2 Using the IRR decision rule, which project should the company accept? O Project A O Project B a-3 Is this decision necessarily correct? Yes No b-1 If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) NPV Project A $ Project B $ b-2 Which project will the company choose if it applies the NPV decision rule? O Project A Project B c. At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percent rounded…
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