QUESTION 2 REQUIRED Study the information given below which was made available by Levis Limited and calculate the following: 2.1 Accounting Rate of Return on average investment of Project A (answer expressed to two decimal places). 2.2 Net Present Value of Project A (amounts rounded off to the nearest Rand.) 2.3 Internal Rate of Return of Project B (answer expressed to two decimal places). INFORMATION The following information relates to two capital investment projects, under consideration by Levis Limited for 2021: Project A Project B Initial cost R800 000 R800 000 Expected useful life 5 years 5 years Scrap/Residual value (not included in the figures below) R80 000 0 Expected annual profits: R R End of: Year 1 Year 2 Year 3 Year 4 Year 5 140 000 130 000 120 000 110 000 100 000 105 000 105 000 105 000 105 000 105 000 The company estimates that its cost of capital is 15%. The straight-line method of depreciation is used.
QUESTION 2
REQUIRED
Study the information given below which was made available by Levis Limited and calculate
the following:
2.1 Accounting
expressed to two decimal places).
2.2
2.3
places).
INFORMATION
The following information relates to two capital investment projects, under consideration by
Levis Limited for 2021:
Project A Project B
Initial cost R800 000 R800 000
Expected useful life 5 years 5 years
Scrap/Residual value (not included in the figures below) R80 000 0
Expected annual profits: R R
End of: Year 1
Year 2
Year 3
Year 4
Year 5
140 000
130 000
120 000
110 000
100 000
105 000
105 000
105 000
105 000
105 000
The company estimates that its cost of capital is 15%. The straight-line method of
depreciation is used.
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