QUESTION 55.1REQUIREDUse the information provided below to calculate the following. Where applicable, use the present value tablesprovided in APPENDICES 1 and 2 that appear after QUESTION 5.5.1.1Payback Period (expressed in years, months and days)5.1.2Accounting Rate of Return, on average investment (expressed to two decimal places)5.1.3Internal Rate of Return (expressed to two decimal places)INFORMATIONRedd Ltd intends purchasing a machine. The following details relate to this machine:Purchase priceR1 200 000Expected useful life4 yearsMinimum required rate of return12%Scrap valueRODepreciationStraight-line methodNet profit per year:1st yearR40 0002nd yearR100 0003rd yearR130 0004th yearR150 0005.2REQUIREDUse the information provided below to answer the following questions:5.2.1Calculate the Net Present Value.5.2.2 Should the project be considered for acceptance? Why?INFORMATIONSchroder Limited is looking at the possibility of investing in a new project. The project would cost R1 000 000,and its cash operating expenses would total R210 000 per year. On the benefit side, it is estimated that thenew project would generate cash revenues of R470 000 per year. The project will have a useful life of fiveyears and is expected to have a scrap value of R90 000. The cost of capital is 12%.

NPV is the difference between the present value of cash inflows and outflows. NPV >0 Accept the…

Use the information provided below to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 5.1.1 Payback Period (expressed in years, months and days) 5.1.2 Accounting Rate of Return, on average investment (expressed to two decimal places) 5.1.3 Internal Rate of Return (expressed to two decimal places) INFORMATION Redd Ltd intends purchasing a machine. The following details relate to this machine: Purchase price R1 200 000 Expected useful life 4 years Minimum required rate of return 12% Scrap value RO Depreciation Straight-line method Net profit per year. 1 year R40 000 2nd year R100 000 3rd vear R130 000

Use the information provided below to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 5.1.1 Payback Period (expressed in years, months and days) 5.1.2 Accounting Rate of Return, on average investment (expressed to two decimal places) 5.1.3 Internal Rate of Return (expressed to two decimal places) INFORMATION Redd Ltd intends purchasing a machine. The following details relate to this machine: Purchase price R1 200 000 Expected useful life 4 years Minimum required rate of return 12% Scrap value RO Depreciation Straight-line method Net profit per year. 1 year R40 000 2nd year R100 000 3rd vear R130 000

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter14: Valuation: Market-based Approach

Section: Chapter Questions

Problem 20PC

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