The management of Nadia Investors has to make a choice between two projects: Project Intensive and Project Primary. Each project will require an initial investment of R2 500 000. INFORMATION Project Intensive Project Primary Net profits Net profits Year R R 1 80 000 130 000 2 180 000 130 000 3 120 000 130 000 4 220 000 130 000 5 50 000 130 000 A scrap value of R100 000 is expected for Project Intensive. Depreciation is calculated on the straightline basis. The required rate of return is 15%. REQUIRED: Use the information provided above to calculate the following: 3.1 Payback Period for Project Intensive (answer in years, months and days). 3.2 Calculate Accounting rate of return for Project Primary (answer in two decimal places). 3.3 Net Present Value for Project Intensive. 3.4 Internal Rate of Return for Project Primary using interpolation (answer in two decimal places.
The management of Nadia Investors has to make a choice between two projects: Project Intensive and
Project Primary. Each project will require an initial investment of R2 500 000.
INFORMATION
Project Intensive Project Primary
Net profits Net profits
Year R R
1 80 000 130 000
2 180 000 130 000
3 120 000 130 000
4 220 000 130 000
5 50 000 130 000
A scrap value of R100 000 is expected for Project Intensive.
straightline basis.
The required
REQUIRED:
Use the information provided above to calculate the following:
3.1 Payback Period for Project Intensive (answer in years, months and days).
3.2 Calculate Accounting rate of return for Project Primary (answer in two decimal places).
3.3
3.4
places.
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