As the financial manager of Soloi Ltd, you are required to analyse two proposed capital investments, namely Projects 02AD and 02ZT. Each has a cost of R100 000, and the cost of capital for each project is 12%. Depreciation on each project is estimated at R25 000 per year. The projects’ expected net profit (loss) are as follows: Year1 2 3 4Required:Project 02ADR40 000 R5 000 R5 000 (R15 000)Project 02ZTR10 000 R10 000 R10 000 R10 000 1. Calculate the payback period for each project.2. Calculate the net present value for each project.3. Determine which project should be chosen (Based on 2 above). 4. Calculate the internal rate of return for project 02ZT. 18:06Notes03 April 2023 at 18:06As the financial manager of Soloi Ltd, you arerequired to analyse two proposed capitalinvestments, namely Projects 02AD and 02ZT.Each has a cost of R100 000, and the cost ofcapital for each project is 12%. Depreciation oneach project is estimated at R25 000 per year.The projects' expected net profit (loss) are asfollows:Year1234Required:Project 02ADR40 000 R5 000 R5 000 (R15 000)Project 02ZTR10 000 R10 000 R10 000 R10 000OOLTE 9741. Calculate the payback period for eachproject.2. Calculate the net present value for eachproject.3. Determine which project should be chosen(Based on 2 above). (3) 4. Calculate the internalrate of return for project 02ZT.O●●●

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Answered: As the financial manager of Soloi Ltd,…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 3CMA

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As the financial manager of Soloi Ltd, you are required to analyse two proposed capital investments, namely Projects 02AD and 02ZT. Each has a cost of R100 000, and the cost of capital for each project is 12%. Depreciation on each project is estimated at R25 000 per year. The projects’ expected net profit (loss) are as follows:

Year

1 2 3 4

Required:

Project 02AD

R40 000 R5 000 R5 000 (R15 000)

Project 02ZT

R10 000 R10 000 R10 000 R10 000

1. Calculate the payback period for each project.

2. Calculate the net present value for each project.

3. Determine which project should be chosen (Based on 2 above). 4. Calculate the internal rate of return for project 02ZT.

18:06
Notes
03 April 2023 at 18:06
As the financial manager of Soloi Ltd, you are
required to analyse two proposed capital
investments, namely Projects 02AD and 02ZT.
Each has a cost of R100 000, and the cost of
capital for each project is 12%. Depreciation on
each project is estimated at R25 000 per year.
The projects' expected net profit (loss) are as
follows:
Year
1234
Required:
Project 02AD
R40 000 R5 000 R5 000 (R15 000)
Project 02ZT
R10 000 R10 000 R10 000 R10 000
OO
LTE 974
1. Calculate the payback period for each
project.
2. Calculate the net present value for each
project.
3. Determine which project should be chosen
(Based on 2 above). (3) 4. Calculate the internal
rate of return for project 02ZT.
O
●●●

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