Question: Denton Manufacturing is considering a project with these projections: Initial amount invested is R800,000 with an expected residual value of R70,000. Year Cashflows Discount factor

Denton Manufacturing is considering a project with these projections:

  • Initial amount invested is R800,000 with an expected residual value of R70,000.

Year

Cashflows

Discount factor

Year 1

R130,000

0.909

Year 2

R150,000

0.826

Year 3

R160,000

0.751

Year 4

R110,000

0.683

Year 5

R120,000

0.621

Cost of capital is 11%. Depreciation is R60,000 per year. Tax rate is 29%.

Required:

  1. Calculate each of the following:
    • 1.4.1 Net Present Value (5)
    • 1.4.2 Internal Rate of Return (5)

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