Use the information provided below to calculate the Accounting Rate of Return on average investment (expressed...

 

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Use the information provided below to calculate the Accounting Rate of Return on average investment (expressed to two decimal places). INFORMATION The management of Unicorn Limited is presently appraising the production and sale of a new product. This would involve the purchase of a new machine with a cost price of R500 000. The machine is expected to have a useful life of six years and a scrap value of R100 000. Annual sales of the product are estimated to be 3 000 units at a selling price of R120 per unit. Expenses (including depreciation) are expected to amount to R80 per unit. 2.2 REQUIRED Use the information provided below to calculate the following: 2.2.1 (5 marks) 2.2.2 Internal Rate of Return (expressed to two decimal places). Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation. Payback Period (expressed in years, months and days) (5 marks) (3 marks) INFORMATION Mitre Limited is investigating the possibility of purchasing a machine for R180 000. The machine is expected to increase net cash flows by R50 000 per annum for five years. Use the information provided below to calculate the Accounting Rate of Return on average investment (expressed to two decimal places). INFORMATION The management of Unicorn Limited is presently appraising the production and sale of a new product. This would involve the purchase of a new machine with a cost price of R500 000. The machine is expected to have a useful life of six years and a scrap value of R100 000. Annual sales of the product are estimated to be 3 000 units at a selling price of R120 per unit. Expenses (including depreciation) are expected to amount to R80 per unit. 2.2 REQUIRED Use the information provided below to calculate the following: 2.2.1 (5 marks) 2.2.2 Internal Rate of Return (expressed to two decimal places). Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation. Payback Period (expressed in years, months and days) (5 marks) (3 marks) INFORMATION Mitre Limited is investigating the possibility of purchasing a machine for R180 000. The machine is expected to increase net cash flows by R50 000 per annum for five years.

Answer rating: 100% (QA)

PART 1 Calculating the Annual Accounting Profit Annual Sales RevenueNumber of units Selling price per unit 3000 R 120 R 360000 Annual Expenses Number ... View the full answer