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Global Investments is considering the following project: The project has an investment of R500 000. The depreciation is calculated...

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QUESTION 4INVESTMENT APPRAISALGlobal Investments is considering the following project:The project has an investment of R50

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Global Investments is considering the following project: The project has an investment of R500 000. The depreciation is calculated on the straight-line method. The net profits after-tax and cash inflows are expected to be as follows: Net profits Cash flows Year R R 1 6 000 106 000 2 10 000 110 000 3 20 000 120 000 4 40 000 140 000 5 50 000 150 000 The firm's cost of capital is 14%. Required: 4.1 Calculate the accounting rate of return. (Two decimal places) 4.2 Calculate the payback period. (Years, months and days) 4.3 If a payback period of three years is required, would the project be accepted? Why? 4.4 Calculate the net present value. (Amounts to the nearest Rand) 4.5 Would the project be accepted? Why?

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Given E Project cost 2 R 500 000 Depreciation method Straight line method Project term 5 yrs Dep View the full answer


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Financial And Management Accounting An Introduction

Financial And Management Accounting An Introduction

ISBN: 9781292244419

8th Edition

Authors: Pauline Weetman

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Posted Date: June 01, 2022 04:20:11
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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue

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