The following data relate to two investment projects, only one of which may be selected: Initial...

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The following data relate to two investment projects, only one of which may be selected: Initial capital expenditure Net profit per year: Year 1 Year 2 Year 3 Project A Project B R R 1 400 000 1 400 000 670 000 270 000 540 000 280 000 410 000 650 000 Year 4 270 000 710 000 Expected scrap value 400 000 0 Note: The straight-line method of depreciation is used. The cost of capital is 15%. Ignore taxes. Answer the questions from the information provided. 4.1 4.1.1 Study the information given below and answer the following questions: Calculate the Payback Period of Project B (expressed in years, months and days). (3 marks) 4.1.2 Calculate the Accounting Rate of Return on initial investment of Project A (expressed to two decimal places). (4 marks) 4.1.3 Calculate the Net Present Value (NPV) of both projects. 4.1.4 Based on the NPV, which project should be chosen? Why? (6 marks) (1 marks) The following data relate to two investment projects, only one of which may be selected: Initial capital expenditure Net profit per year: Year 1 Year 2 Year 3 Project A Project B R R 1 400 000 1 400 000 670 000 270 000 540 000 280 000 410 000 650 000 Year 4 270 000 710 000 Expected scrap value 400 000 0 Note: The straight-line method of depreciation is used. The cost of capital is 15%. Ignore taxes. Answer the questions from the information provided. 4.1 4.1.1 Study the information given below and answer the following questions: Calculate the Payback Period of Project B (expressed in years, months and days). (3 marks) 4.1.2 Calculate the Accounting Rate of Return on initial investment of Project A (expressed to two decimal places). (4 marks) 4.1.3 Calculate the Net Present Value (NPV) of both projects. 4.1.4 Based on the NPV, which project should be chosen? Why? (6 marks) (1 marks)

Answer rating: 100% (QA)

411 Payback Period of Project B Year 1 R270000 Year 2 R280000 cumulative total R270000 R280000 R5500... View the full answer