Wozo Ltd is to spend $60,000 on a machine which will have an economic life of ten years and no residual value. Depreciation is to be charged using the straight line method. Estimated operating cash flows are: Year 1: - 2 000 Year 2: +13 000 Year 3: +20 000 Year 4-6: +25 000 per annum Year 7-20 +30 000 per annum Required: Calculate the payback period and the Accounting Rate of Return (ARR); (using the initial investment base not the average investment base) (show all you calculations)
Wozo Ltd is to spend $60,000 on a machine which will have an economic life of ten years and no residual value. Depreciation is to be charged using the straight line method. Estimated operating cash flows are: Year 1: - 2 000 Year 2: +13 000 Year 3: +20 000 Year 4-6: +25 000 per annum Year 7-20 +30 000 per annum Required: Calculate the payback period and the Accounting Rate of Return (ARR); (using the initial investment base not the average investment base) (show all you calculations)
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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Wozo Ltd is to spend $60,000 on a machine which will have an economic life of ten years
and no residual value.
Estimated operating cash flows are:
Year 1: - 2 000
Year 2: +13 000
Year 3: +20 000
Year 4-6: +25 000 per annum
Year 7-20 +30 000 per annum
Required:
Calculate the payback period and the Accounting
investment base not the average investment base) (show all you calculations)
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