The management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each of which requires an initial investment of R2 500 000. The following information is presented to you: 5.1 5.2 5.3 Year 5.4 1 5.5 2 3 PROJECT COS Net Profit R 130 000 130 000 130 000 130 000 PROJECT TAN Net Profit R 130 000 A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method. 80 000 180 000 Use the information provided above to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 120 000 220 000 50 000 Payback Period of Project Tan (expressed in years, months and days). Net Present Value of Project Tan. Accounting Rate of Return on average investment of Project Tan (expressed to two decimal places). Benefit Cost Ratio of Project Cos (expressed to three decimal places). Internal Rate of Return of Project Cos (expressed to two decimal places) USING INTERPOLATION. ||||U

The management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each of which requires an initial investment of R2 500 000. The following information is presented to you: 5.1 5.2 5.3 Year 5.4 1 5.5 2 3 PROJECT COS Net Profit R 130 000 130 000 130 000 130 000 PROJECT TAN Net Profit R 130 000 A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method. 80 000 180 000 Use the information provided above to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 120 000 220 000 50 000 Payback Period of Project Tan (expressed in years, months and days). Net Present Value of Project Tan. Accounting Rate of Return on average investment of Project Tan (expressed to two decimal places). Benefit Cost Ratio of Project Cos (expressed to three decimal places). Internal Rate of Return of Project Cos (expressed to two decimal places) USING INTERPOLATION. ||||U

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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INFORMATION
The management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each of
which requires an initial investment of R2 500 000. The following information is presented to you:
PROJECT TAN
5.1
5.2
5.3
Year
5.4
1
5.5
2
3
5
PROJECT COS
Net Profit
R
130 000
130 000
130 000
130 000
130 000
Net Profit
R
80 000
A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated
using the straight-line method.
180 000
Use the information provided above to calculate the following. Where applicable, use the present value tables
provided in APPENDICES 1 and 2 that appear after QUESTION 5.
120 000
220 000
50 000
Payback Period of Project Tan (expressed in years, months and days).
Net Present Value of Project Tan.
Accounting Rate of Return on average investment of Project Tan (expressed to two decimal places).
Benefit Cost Ratio of Project Cos (expressed to three decimal places).
Internal Rate of Return of Project Cos (expressed to two decimal places) USING INTERPOLATION.

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