Machine A Machine B R100 000 R110 000 Initial cost 5 years 5 years Expected economic life R10 000 0. Expected disposal/residual value R. R Expected net cash inflows 34 000 33 000 End of: Year 1 27 000 33 000 Year 2 Year 3 32 000 33 000 Year 4 30 000 33 000 Year 5 26 000 33 000 Depreciation per year 18 000 22 000 The company estimates that its cost of capital is 14%. Calculate the payback period for Machine A and B (answers must be expressed in years, and days). 2.1 2.2 Calculate the accounting rate of return (on average investment) for Machine A. (answer roun to 2 decimal places).

Machine A Machine B R100 000 R110 000 Initial cost 5 years 5 years Expected economic life R10 000 0. Expected disposal/residual value R. R Expected net cash inflows 34 000 33 000 End of: Year 1 27 000 33 000 Year 2 Year 3 32 000 33 000 Year 4 30 000 33 000 Year 5 26 000 33 000 Depreciation per year 18 000 22 000 The company estimates that its cost of capital is 14%. Calculate the payback period for Machine A and B (answers must be expressed in years, and days). 2.1 2.2 Calculate the accounting rate of return (on average investment) for Machine A. (answer roun to 2 decimal places).

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.1.1MBA

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MACHINE A MACHINE B INITIAL COST R100 000 R110 000 EXPECTED ECONOMIC LIFE 5 YEARS 5 YEARS EXPECTED DISPOSAL/RESIDUAL VALUE R10 000 EXPECTED NET CASH INFLOWS R R END OF: YEAR 1 34 000 33 000 YEAR 2 27 000 33 000 YEAR 3 32 000 33 000 YEAR 4 30 000 33 000 YEAR 5 26 000 33 000 DEPRECIATION PER YEAR 18 000 22 000 COMPANY ESTIMATES COST CAPITAL = 14% 2) Calculate the accounting rate of return (on average investment) for Machine A. (answer rounded offto 2 decimal places).
MACHINE A MACHINE B INITIAL COST R100 000 R110 000 EXPECTED ECONOMIC LIFE 5 YEARS 5 YEARS EXPECTED DISPOSAL/RESIDUAL VALUE R10 000 EXPECTED NET CASH INFLOWS R R END OF: YEAR 1 34 000 33 000 YEAR 2 27 000 33 000 YEAR 3 32 000 33 000 YEAR 4 30 000 33 000 YEAR 5 26 000 33 000 DEPRECIATION PER YEAR 18 000 22 000 COMPANY ESTIMATES COST CAPITAL = 14% 4)Calculate the internal rate of return for Machine B.
Find the present value of the stream of cash flows shown in the follwing tables. Assume that the firms opportunity cost is 15% A: Year Cash Flow 1 -$2000 2 $3000 3 $3900 4 $6100 5 $8100 B: Year Cash Flow 1 $11000 2-5 $5000/yr 6 $7000 C: Year Cash Flow 1-5 $12000/yr 6-10 $8100/yr
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A Ltd. is considering a Project having a life of 5 year with following cash flows Project I 30,000 Outflow Inflow T-1 T-2 8,000 9,000 T-3 T-4 T-5 9,000 7,000 5,000 P.V. Table Year 10% 909 20 269 309% 35%6 741 .833 .794 796 2. .826 .694 .630 500 592 751 .683 549 406 301 579 455 482 397 350 .621 402 315 269 223 Calculate IRR of the above project.