The management of Bongani Wholesalers are considering two mutually exclusive investment projects. The following data are available for each project: Project A Project B Disc Factor N$ N$ Cost of plant and equipment 90 000 60 000 Salvage value nil nil Expected cash flows: Year 1 55 000 27 500 0,909 Year 2 12 500 30 750 0,826 Year 3 52 500 34 750 0,751 The estimated cost of capital is 10% per annum. The assets’ life is 3 years. Required: Calculate for each project The Payback Period The Net Present Value Briefly describe the advantages and disadvantages of the following capital appraisal techniques: Payback Period Net Present Value Internal Rate of Return Accounting rate of Return
The management of Bongani Wholesalers are considering two mutually exclusive investment projects. The following data are available for each project:
Project A Project B Disc Factor
N$ N$
Cost of plant and equipment 90 000 60 000
Salvage value nil nil
Expected
Year 1 55 000 27 500 0,909
Year 2 12 500 30 750 0,826
Year 3 52 500 34 750 0,751
The estimated cost of capital is 10% per annum. The assets’ life is 3 years.
Required: Calculate for each project
- The Payback Period
- The
Net Present Value - Briefly describe the advantages and disadvantages of the following capital appraisal techniques:
- Payback Period
- Net Present Value
Internal Rate of Return - Accounting rate of Return
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