Use the information provided below to calculate the following. Note: Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 5.1 Payback Period of both projects (expressed in years, months and days). 5.2 Accounting Rate of Return (on average investment) of Project X (expressed to two decimal places). 5.3 Net Present Value of each project. 5.4 Internal Rate of Return of Project Y using interpolation (expressed to two decimal places).
Use the information provided below to calculate the following. Note: Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 5.1 Payback Period of both projects (expressed in years, months and days). 5.2 Accounting Rate of Return (on average investment) of Project X (expressed to two decimal places). 5.3 Net Present Value of each project. 5.4 Internal Rate of Return of Project Y using interpolation (expressed to two decimal places).
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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Question
Please answer question 5.3 and 5.4
Transcribed Image Text:Use the information provided below to calculate the following. Note: Where applicable, use the
present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5.
5.1
Payback Period of both projects (expressed in years, months and days).
5.2
Accounting Rate of Return (on average investment) of Project X (expressed to two decimal places).
5.3
Net Present Value of each project.
5.4
Internal Rate of Return of Project Y using interpolation (expressed to two decimal places).
INFORMATION
The following information relates to two capital investment projects viz. Project X and Project Y that are under
consideration by Asic Limited:
The initial investment in each project is R400 000, with a useful life of four years. The estimated cost of capital is
16%. No scrap values are anticipated for the projects. The straight-line method of depreciation is used.
The estimated net profits of Project X over its useful life are as follows:
Year 1
R70 000
Year 2
R50 000
Year 3
R100 000
Year 4
R30 000
Project Y is expected to generate net cash flows of R140 000 per year over the four-year period.
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