After a bad accident Anton receives a large sum in compensation. He is thinking about using it to invest in a stretch limousine to hire out for special occasions. The cost of the limousine is £100,000. Anton is due to retire in six years, at which stage he thinks he will be able to sell the limousine for £40,000. The net cash inflows for the venture, after allowing for the driver's wages and other direct expenses are: End of year Net cash flow (£) 1 10,000 2 15,000 3 20,000 4 20,000 5 20,000 6 15,000 (a) Find the payback period for this venture. (b) Calculate the net present value using a discount rate of 8%. After a bad accident Anton receives a large sum incompensation. He is thinking about using it to investin a stretch limousine to hire out for specialoccasions. The cost of the limousine is £100,000.Anton is due to retire in six years, at which stage hethinks he will be able to sell the limousine for£40,000. The net cash inflows for the venture, afterallowing for the driver's wages and other directexpenses are:End of yearNet cash flow (£)110,000215,000320,000420,00020,0006.15,000(a) Find the payback period for this venture.(b) Calculate the net present value using a discountrate of 8%.

Information Provided: Discount rate = 8% Salvage = 40,000 Cost = 100,000

Answered: (a) Find the payback period for this…

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter16: Accounting Periods And Methods

Section: Chapter Questions

Problem 12DQ

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After a bad accident Anton receives a large sum in compensation. He is thinking about using it to invest in a stretch limousine to hire out for special occasions. The cost of the limousine is £100,000. Anton is due to retire in six years, at which stage he thinks he will be able to sell the limousine for £40,000. The net cash inflows for the venture, after allowing for the driver's wages and other direct expenses are: End of year Net cash flow (£) 1 10,000 2 15,000 3 20,000 4 20,000 5 20,000 6 15,000 (a) Find the payback period for this venture. (b) Calculate the net present value using a discount rate of 8%.

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