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Sunshine Corporation is reviewing an investment proposal. The initial cost of the investment is R52 500. The estimated cash flows and net profit for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. Year        Net cash flows        Net profit 1               R20 000                  R2 500 2               R17 500                  R3 500 3               R15 000                  R4 500 4               R12 500                  R5 500 5               R10 000                  R6 500 The cost of capital is 12%. Required: Calculate the following: 1. Payback Period  2. Net Present value  3. Accounting rate of return

Sunshine Corporation is reviewing an investment proposal. The initial cost of the investment is R52 500. The estimated cash flows and net profit for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. Year        Net cash flows        Net profit 1               R20 000                  R2 500 2               R17 500                  R3 500 3               R15 000                  R4 500 4               R12 500                  R5 500 5               R10 000                  R6 500 The cost of capital is 12%. Required: Calculate the following: 1. Payback Period  2. Net Present value  3. Accounting rate of return

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 18EB: Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the...
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Sunshine Corporation is reviewing an investment proposal. The initial cost of the investment is R52 500. The estimated cash flows and net profit for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year.


Year        Net cash flows        Net profit
1               R20 000                  R2 500
2               R17 500                  R3 500
3               R15 000                  R4 500
4               R12 500                  R5 500
5               R10 000                  R6 500


The cost of capital is 12%.
Required:
Calculate the following:
1. Payback Period 
2. Net Present value 
3. Accounting rate of return

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