A company is wondering whether to spend GH¢ 10,000,000 on an item of equipment in order to obtain cash profits as follows. Year GH¢ 1 3,000,000 3,400,000 3 2,400,000 1,800,000 The company requires a return of 20% per annum on this project. a) Calculate : (i) The payback period. (ii) the discounted payback period and (iii) The Net Present Value (NPV) of the project. b) If the Company has set a maximum PayBack Period of 3.5 years, for projects of this type, should this project be accepted? c) Is the Project viable by the NPV method? 2. 4)

A company is wondering whether to spend GH¢ 10,000,000 on an item of equipment in order to obtain cash profits as follows. Year GH¢ 1 3,000,000 3,400,000 3 2,400,000 1,800,000 The company requires a return of 20% per annum on this project. a) Calculate : (i) The payback period. (ii) the discounted payback period and (iii) The Net Present Value (NPV) of the project. b) If the Company has set a maximum PayBack Period of 3.5 years, for projects of this type, should this project be accepted? c) Is the Project viable by the NPV method? 2. 4)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 22E

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