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Pearl Limited is considering upgrading its plant to expand it client base. The financial details of the investment proposal are as follows: Cost of plant R4 700 000

Pearl Limited is considering upgrading its plant to expand it client base. The financial details of the investment proposal are as follows: Cost of plant R4 700 000

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
Problem 1PS
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Pearl Limited is considering upgrading its plant to expand it client base. The financial details of the investment proposal are as follows: Cost of plant R4 700 000 Import duty R 900 000 Installation cost R 450 000 Net cash flows Year 1-8 R1 700 000 per annum (excluding residual value) Residual/scrap value R1 300 000 The company uses straight-line depreciation. The cost of capital for projects of similar risk is 18%. Ignore taxation.
Transcribed Image Text:Pearl Limited is considering upgrading its plant to expand it client base. The financial details of the investment proposal are as follows: Cost of plant R4 700 000 Import duty R 900 000 Installation cost R 450 000 Net cash flows Year 1-8 R1 700 000 per annum (excluding residual value) Residual/scrap value R1 300 000 The company uses straight-line depreciation. The cost of capital for projects of similar risk is 18%. Ignore taxation.
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