Amazon Ltd is considering investing in a new software development project with the following forecasted details Initial amount invested is R600,000 and expected residual value is R50,000 Year Cashflows Discount factor Year 1 R200,000 0 909 Year 2 R220,000 0 826 Year 3 R230,000 0 751 Year 4 R240,000 0 683 Year 5 R250,000 0 621 Assuming that the cost of capital for the company is 8 The cash flows are after tax and depreciation is charged at R60,000 per year Tax rate is 25 Required Calculate each of the following 1 1 1 Net Present Value (NPV) (10) 1 1 2 Internal Rate of Return (IRR) (10)

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Question: Amazon Ltd is considering investing in a new software development project with the following forecasted details: Initial amount invested is R600,000 and expected residual value

Amazon Ltd is considering investing in a new software development project with the following forecasted details: Initial amount invested is R600,000 and expected residual value is R50,000.

Year	Cashflows	Discount factor
Year 1	R200,000	0.909
Year 2	R220,000	0.826
Year 3	R230,000	0.751
Year 4	R240,000	0.683
Year 5	R250,000	0.621

Assuming that the cost of capital for the company is 8%. The cash flows are after tax and depreciation is charged at R60,000 per year. Tax rate is 25%.

Required:

Calculate each of the following: 1.1.1. Net Present Value (NPV) (10) 1.1.2. Internal Rate of Return (IRR) (10)

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