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Use the information provided to answer the questions. 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. 5.1.3 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. Motivate your choice.   INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in one of them. You are given the following projected data: Project A Project B Initial cost R300 000 R300 000 Scrap value R40 000 0 Depreciation per year R52 000 R60 000 Net profit Year 1 R20 000 Year 2 R30 000 Year 3 R50 000 Year 4 R60 000 Year 5 R10 000 Net cash flows Year 1 R90 000 Year 2 R90 000 Year 3 R90 000 Year 4 R90 000 Year 5 R90 000 Additional information The discount rate used by the company is 12%.

Use the information provided to answer the questions. 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. 5.1.3 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. Motivate your choice.   INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in one of them. You are given the following projected data: Project A Project B Initial cost R300 000 R300 000 Scrap value R40 000 0 Depreciation per year R52 000 R60 000 Net profit Year 1 R20 000 Year 2 R30 000 Year 3 R50 000 Year 4 R60 000 Year 5 R10 000 Net cash flows Year 1 R90 000 Year 2 R90 000 Year 3 R90 000 Year 4 R90 000 Year 5 R90 000 Additional information The discount rate used by the company is 12%.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question

Use the information provided to answer the questions.
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.

5.1.3 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. Motivate
your choice.

 

INFORMATION


Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in
one of them. You are given the following projected data:
Project A Project B
Initial cost R300 000 R300 000
Scrap value R40 000 0
Depreciation per year R52 000 R60 000
Net profit
Year 1 R20 000
Year 2 R30 000
Year 3 R50 000
Year 4 R60 000
Year 5 R10 000
Net cash flows
Year 1 R90 000
Year 2 R90 000
Year 3 R90 000
Year 4 R90 000
Year 5 R90 000


Additional information
The discount rate used by the company is 12%.

Number of Periods 1 2 3 4 5 6 7 8 m 10 11 12 13 14 15 1% 2% 0.9901 0.9804 0.9709 3% 3.9020 3.8077 3.7171 筑 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 0.9615 0.9524 0.9434 1.9704 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 5% 7.6517 7.3255 7.0197 6.7327 11.2551 10.5753 6% 4.8534 4.7135 4.5797 4.4518 4.3295 4.2124 4.1002 13.0037 12.1062 8.5660 8.1622 7.7861 7.4353 7.1078 10.3676 9.7868 9.2526 8.7605 12.1337 11.3484 10.6350 9.9856 7% 0.9346 9.9540 9.3851 B.B633 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 6.8017 6.7282 6.4720 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 5.0330 4.8684 11.2961 10.5631 9.8986 8% 0.9259 8.3838 9.3936 8.8527 1.7833 6.4632 6.2096 5.9713 5.7466 5.5348 5.7955 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.2305 4.1114 9% 8.3577 10% 0.9174 0.9091 3.9927 3.8897 3.7908 9.4713 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 6.1446 5.8892 8.3064 7.8869 7.4987 7.1390 6.8052 6.4951 7.9427 7.5361 1.7591 1.7355 1.7125 7.9038 9.2950 8.7455 8.2442 13.8651 12.8493 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 11% 0.9009 7.1607 6.8137 2.6243 2.5771 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 2.2459 2.2096 2.1743 2.1399 2.1065 12% 0.8929 13% 0.8850 3.6959 3.6048 3.5172 3.4331 6.4924 14% 7.4869 7.1034 6.7499 0.8772 1.6901 1.6681 1.6467 7.7862 7.3667 6.9819 8.0607 7.6061 7.1909 15% 0.8696 16% 3.1024 3.0373 2.9745 2.9137 2.8550 2.7982 2.7432 2.6901 2.6386 2.5887 6.5152 6.2469 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.7716 4.6065 4.4506 4.3038 0.8621 0.8547 17% 4.7122 4.5638 4.4226 4.2883 4.1604 4.0386 3.9224 1.6257 1.6052 1.5852 1.5656 1.5465 1.5278 5.3349 5.1461 4.9676 4.7988 4.6389 4.4873 4.3436 4.2072 4.0776 3.9544 3.8372 18% 6.2065 5.9377 5.6869 5.4527 5.2337 5.0286 4.8364 3.3522 3.2743 3.1993 3.1272 3.0576 2.9906 0.8475 0.8403 0.8333 3.9975 3.8887 3.7845 3.6847 3.5892 3.4976 3.4098 3.3255 5.6502 5.4262 5.2161 5.0188 4.8332 4.6586 19% 20% 6.6282 6.3025 6.0021 5.7245 5.4675 38115 6.8109 6.4624 6.1422 5.8474 5.5755 4.4941 3.7057 3.6046 6.1944 5.9176 5.6603 5.4206 5.1971 4.9884 4.7932 4.6105 4.4392 5.2293 5.0081 4.1633 4.0310 4.6560 4.4865 4.3271 6.4235 6.1218 5.8424 5.5831 5.3423 5.1183 4.9095 4.7147 4.5327 5.3242 5.0916 4.3389 4.1925 4.8023 4.6106 4.8759 4.6755
Transcribed Image Text:Number of Periods 1 2 3 4 5 6 7 8 m 10 11 12 13 14 15 1% 2% 0.9901 0.9804 0.9709 3% 3.9020 3.8077 3.7171 筑 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 0.9615 0.9524 0.9434 1.9704 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 5% 7.6517 7.3255 7.0197 6.7327 11.2551 10.5753 6% 4.8534 4.7135 4.5797 4.4518 4.3295 4.2124 4.1002 13.0037 12.1062 8.5660 8.1622 7.7861 7.4353 7.1078 10.3676 9.7868 9.2526 8.7605 12.1337 11.3484 10.6350 9.9856 7% 0.9346 9.9540 9.3851 B.B633 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 6.8017 6.7282 6.4720 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 5.0330 4.8684 11.2961 10.5631 9.8986 8% 0.9259 8.3838 9.3936 8.8527 1.7833 6.4632 6.2096 5.9713 5.7466 5.5348 5.7955 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.2305 4.1114 9% 8.3577 10% 0.9174 0.9091 3.9927 3.8897 3.7908 9.4713 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 6.1446 5.8892 8.3064 7.8869 7.4987 7.1390 6.8052 6.4951 7.9427 7.5361 1.7591 1.7355 1.7125 7.9038 9.2950 8.7455 8.2442 13.8651 12.8493 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 11% 0.9009 7.1607 6.8137 2.6243 2.5771 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 2.2459 2.2096 2.1743 2.1399 2.1065 12% 0.8929 13% 0.8850 3.6959 3.6048 3.5172 3.4331 6.4924 14% 7.4869 7.1034 6.7499 0.8772 1.6901 1.6681 1.6467 7.7862 7.3667 6.9819 8.0607 7.6061 7.1909 15% 0.8696 16% 3.1024 3.0373 2.9745 2.9137 2.8550 2.7982 2.7432 2.6901 2.6386 2.5887 6.5152 6.2469 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.7716 4.6065 4.4506 4.3038 0.8621 0.8547 17% 4.7122 4.5638 4.4226 4.2883 4.1604 4.0386 3.9224 1.6257 1.6052 1.5852 1.5656 1.5465 1.5278 5.3349 5.1461 4.9676 4.7988 4.6389 4.4873 4.3436 4.2072 4.0776 3.9544 3.8372 18% 6.2065 5.9377 5.6869 5.4527 5.2337 5.0286 4.8364 3.3522 3.2743 3.1993 3.1272 3.0576 2.9906 0.8475 0.8403 0.8333 3.9975 3.8887 3.7845 3.6847 3.5892 3.4976 3.4098 3.3255 5.6502 5.4262 5.2161 5.0188 4.8332 4.6586 19% 20% 6.6282 6.3025 6.0021 5.7245 5.4675 38115 6.8109 6.4624 6.1422 5.8474 5.5755 4.4941 3.7057 3.6046 6.1944 5.9176 5.6603 5.4206 5.1971 4.9884 4.7932 4.6105 4.4392 5.2293 5.0081 4.1633 4.0310 4.6560 4.4865 4.3271 6.4235 6.1218 5.8424 5.5831 5.3423 5.1183 4.9095 4.7147 4.5327 5.3242 5.0916 4.3389 4.1925 4.8023 4.6106 4.8759 4.6755
Number of Periods 1 2 3 4 5 6 7 8 日 10 11 12 13 14 15 1% 2% 3% 0.9901 0.9804 0.9709 0.9615 0.9524 0.9803 0.9612 0.9426 0.9246 0.9070 菠 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.9235 0.8535 0.7894 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.8874 5% 0.8787 0.9143 0.8368 0.7664 0.7026 0.6446 0.7307 0.7730 0.8700 0.7579 0.6611 6% 0.7885 0.7014 0.6246 0.5568 0.6810 0.6006 0.8613 0.7430 0.6419 0.9434 0.9346 0.9259 0.5775 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.5674 0.5553 7% 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.4817 0.4523 0.8963 0.8043 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.8900 0.8734 0.8573 0.8417 0.8264 8% 0.8163 0.5051 0.7938 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 0.4970 0.5303 0.4688 0.9174 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.9091 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.4104 0.7722 0.7513 0.7629 0.7350 0.7084 0.6830 0.6587 0.6355 0.4150 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 0.3220 0.2946 0.9009 0.8929 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 0.3606 0.8116 0.7972 0.7831 0.7695 0.7312 0.7118 0.6931 0.3677 0.3262 0.2897 0.4423 0.3878 0.3405 0.2992 0.4440 0.3971 0.3555 0.3186 0.2858 0.2633 0.4339 0.4039 0.4810 0.4173 0.3624 0.3152 0.2745 0.2394 0.8850 0.6133 0.3875 0.3505 0.3173 0.2875 0.2607 0.2567 0.5428 0.2575 0.2292 0.4251 0.8772 0.6750 0.3329 0.3075 0.2320 0.2046 0.1807 0.8696 0.8621 0.5921 0.5718 0.5523 0.7561 0.7432 0.7305 0.7182 0.3762 0.3506 0.3269 0.3050 0.2848 0.2307 0.2076 0.2042 0.1821 0.8547 0.3996 0.3759 0.3538 0.3332 0.6575 0.6407 0.6244 0.6086 0.5934 0.5787 0.5120 0.2697 0.2472 0.2267 0.2843 0.2630 0.5337 0.5194 0.4972 0.4761 0.4561 0.4371 0.4190 0.4019 0.3277 0.8475 0.3898 0.3704 0.2434 0.2090 0.1827 0.1599 0.1401 0.1229 0.1079 0.5158 0.2080 25% 0.8403 0.8333 0.8000 0.7062 0.6944 0.6400 0.4987 0.4823 0.4096 0.1911 0.3521 0.3349 0.2621 0.3139 0.2959 0.2791 0.2097 0.2660 0.2487 0.2326 0.1678 0.2255 0.2090 0.1938 0.1342 0.2366 0.2149 0.1954 0.177B 0.1619 0.1476 0.1346 0.0859 0.1756 0.1615 0.1074 0.1869 0.1685 0.1520 0.1372 0.1240 0.1122 0.0687 0.1625 0.1452 0.1299 0.1163 0.1042 0.0935 0.0550 0.1597 0.1413 0.1252 0.1110 0.0985 0.0676 0.0779 0.0440 0.0949 0.0835 0.0736 0.0649 0.0352
Transcribed Image Text:Number of Periods 1 2 3 4 5 6 7 8 日 10 11 12 13 14 15 1% 2% 3% 0.9901 0.9804 0.9709 0.9615 0.9524 0.9803 0.9612 0.9426 0.9246 0.9070 菠 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.9235 0.8535 0.7894 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.8874 5% 0.8787 0.9143 0.8368 0.7664 0.7026 0.6446 0.7307 0.7730 0.8700 0.7579 0.6611 6% 0.7885 0.7014 0.6246 0.5568 0.6810 0.6006 0.8613 0.7430 0.6419 0.9434 0.9346 0.9259 0.5775 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.5674 0.5553 7% 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.4817 0.4523 0.8963 0.8043 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.8900 0.8734 0.8573 0.8417 0.8264 8% 0.8163 0.5051 0.7938 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 0.4970 0.5303 0.4688 0.9174 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.9091 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.4104 0.7722 0.7513 0.7629 0.7350 0.7084 0.6830 0.6587 0.6355 0.4150 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 0.3220 0.2946 0.9009 0.8929 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 0.3606 0.8116 0.7972 0.7831 0.7695 0.7312 0.7118 0.6931 0.3677 0.3262 0.2897 0.4423 0.3878 0.3405 0.2992 0.4440 0.3971 0.3555 0.3186 0.2858 0.2633 0.4339 0.4039 0.4810 0.4173 0.3624 0.3152 0.2745 0.2394 0.8850 0.6133 0.3875 0.3505 0.3173 0.2875 0.2607 0.2567 0.5428 0.2575 0.2292 0.4251 0.8772 0.6750 0.3329 0.3075 0.2320 0.2046 0.1807 0.8696 0.8621 0.5921 0.5718 0.5523 0.7561 0.7432 0.7305 0.7182 0.3762 0.3506 0.3269 0.3050 0.2848 0.2307 0.2076 0.2042 0.1821 0.8547 0.3996 0.3759 0.3538 0.3332 0.6575 0.6407 0.6244 0.6086 0.5934 0.5787 0.5120 0.2697 0.2472 0.2267 0.2843 0.2630 0.5337 0.5194 0.4972 0.4761 0.4561 0.4371 0.4190 0.4019 0.3277 0.8475 0.3898 0.3704 0.2434 0.2090 0.1827 0.1599 0.1401 0.1229 0.1079 0.5158 0.2080 25% 0.8403 0.8333 0.8000 0.7062 0.6944 0.6400 0.4987 0.4823 0.4096 0.1911 0.3521 0.3349 0.2621 0.3139 0.2959 0.2791 0.2097 0.2660 0.2487 0.2326 0.1678 0.2255 0.2090 0.1938 0.1342 0.2366 0.2149 0.1954 0.177B 0.1619 0.1476 0.1346 0.0859 0.1756 0.1615 0.1074 0.1869 0.1685 0.1520 0.1372 0.1240 0.1122 0.0687 0.1625 0.1452 0.1299 0.1163 0.1042 0.0935 0.0550 0.1597 0.1413 0.1252 0.1110 0.0985 0.0676 0.0779 0.0440 0.0949 0.0835 0.0736 0.0649 0.0352
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