QUESTION 5Use the information provided below to answer the following questions. Where applicable, use the present value tablesprovided in APPENDICES 1 and 2 that appear after QUESTION 5.5.15.25.35.45.5Calculate the Payback Period of both machines (expressed in years, months and days.)Which machine should be chosen on the basis of payback period only? Why?Calculate the Accounting Rate of Return (on average investment) of Machine A (expressed to twodecimal places).Calculate the Net Present Value of each machine (amounts expressed to the nearest Rand.)Calculate the Internal Rate of Return of Machine B (expressed to two decimal places) usinginterpolation. INFORMATIONNiterra Limited intends purchasing a new machine and has a choice between the following two machines:Initial costExpected useful lifeScrap valueExpected net profit or net cash flowsYear 1Year 2Year 3Year 4Year 5Machine AR400 0005 years0Net profitR20 000R40 000R50 000R70 000APPENDIX 1: PRESENT VALUE OF R10Machine BR400 0005 years0Net cash flowsR116 000R116 000R116 000R116 000R116 000The company estimates that it's cost of capital is 12%. Depreciation is estimated at R80 000 per year.

Payback period Payback period is the span of time required to recover the original initial…

Use the information provided below to answer the following questions. Where applicable, use the present value provided in APPENDICES 1 and 2 that appear after QUESTION 5. Calculate the Payback Period of both machines (expressed in years, months and days.) 5.1 5.2 5.3 Which machine should be chosen on the basis of payback period only? Why? Calculate the Accounting Rate of Return (on average investment) of Machine A (expressed to two decimal places).

Use the information provided below to answer the following questions. Where applicable, use the present value provided in APPENDICES 1 and 2 that appear after QUESTION 5. Calculate the Payback Period of both machines (expressed in years, months and days.) 5.1 5.2 5.3 Which machine should be chosen on the basis of payback period only? Why? Calculate the Accounting Rate of Return (on average investment) of Machine A (expressed to two decimal places).

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 12E: Refer to Exercise 19.11. 1. Compute the payback period for each project. Assume that the manager of...

See similar textbooks

Similar questions

7 Rate of Return (ROR) is an important factor to consider to determine the gain or loss of an investment over a specified period of time. Please provide an explanation of the other evaluation metrics excluding the rate of returns to analyze precise profit and loss of an investment.
Question 3 Assume you are given the following information regarding the expected returns for an asset, for different states of the economy. Show work for all parts requiring computation. state. probability expected return Recession 0.1 -0.04 normal 0.5 0.07 expansion 0.4 0.12 What is the expected return for the asset? What is the standard deviation of returns for the asset?
Please help answer From Question 3.1 to 3.5 REQUIREDStudy the information provided below and calculate the following:3.1 Payback Period of Project A (answer expressed in years, months and days). 3.2 Accounting Rate of Return (on average investment) of Project B (answer expressed totwo decimal places).3.3 Net Present Value of both projets (amounts rounded off to the nearest Rand). 3.4 Benefit Cost Ratio of Project A (answer expressed to three decimal places). 3.5 Internal Rate of Return of Project B (answer expressed to two decimal places). INFORMATIONThe following information relates to two possible capital expenditure projects being considered by EdamLtd. Because of capital rationing, only one project can be accepted.Project A Project BInitial cost R800 000 R800 000Expected useful life 5 years 5 yearsAverage annual profit R80 000 R80 000Expected net cash inflows: R RYear 1 240 000 240 000Year 2 260 000 240 000Year 3 280 000 240 000Year 4 220 000 240 000Year 5 200 000 240 000The…
(1) Compute the payback period. 1b) Compute the accounting rate of return for this equipment.
Use the information provided to answer the questions.5.1 Use the information provided below to calculate the following. Where applicable, use the presentvalue tables provided in APPENDICES 1 and 2 that appear after QUESTION 5.5.1.1 Calculate the Payback Period of Project A (expressed in years, months and days). 5.1.2Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to twodecimal places). 5.1.3 Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). 5.1.4 Use your answers from question 5.1.3 to recommend the project that should be chosen. Motivateyour choice.
Amount Desired at End of Period Length of Time Rate Compounded $ 8,900.00 4 6% Monthly Required: Complete the following using the information above and the present value Table 12.3, the present value table in the Business Math Handbook, or the present value formula to answer the following: Period Used Rate Used PV factor used PV of amount desired at end of period
QUESTION 2 One of the reports submitted by the infrastructure development team revealed the following Year 0 1 2 3 4 Cashflows A -R 210000 ,R15000 ,R 30000 , R 30 000 ,R 370000 Cashflow B -R 21000 , R11000 ,R 9000, R11000, R 9000 Suppose you require a 15 per cent return on investment. 2.1 Using the discounted payback period which investment would you choose and why? 2.2 If you apply the NPV rule which investment, will you choose and why? 2.3 Based on the provided answers which project would you finally choose and why? All parts correctly pls with explanation thanks!
Question 3 Given 10% discount rate, what is the profitability index of the investment project described below? 1.00 0.90 0.95 1.03 1.09 Question 4 What is the best method to use when expressing investment profitability as a percentage? Pick from the answers given below. Payback period Discounted payback period NPV AAR IRR
Q24. The level of detail in a model should not depend on the application. For example, for regular work you may forecast depreciation using a growth rate, a percentage of sales, or PP&E. Choices: True or False
3. Compute Project Y’s accounting rate of return. The numerator drop down options are: accounts receivable, annual income, average investment, average total assets, cost of goods sold, current assets, current liabilities, net sales, total assets The denominator dropdown options are: accounts receivable, annual income, average investment, average total assets,
Amount Desired at End of Period Length of Time Rate Compounded $ 17,600.00 7 2% Quarterly Required: Complete the following using the information above and the present value Table 12.3 or the present value table in the Business Math Handbook or the present value formula to answer the following: Period Used Rate Used PV factor used PV of amount desired at end of period
QUESTION 37 To estimate the future value of a resource, the World Bank and most businesses use _____. a. a 10% annual discount rate b. a 20% annual decrease c. a 20% annual gain in value d. a 10% annual increase e. complicated calculations based upon the specific resource