Question: Jackson Corp is evaluating a project with the following financial projections: Initial investment of R1,800,000 with an expected residual value of R140,000. Year Cashflows Discount

Jackson Corp is evaluating a project with the following financial projections:

  • Initial investment of R1,800,000 with an expected residual value of R140,000.

Year

Cashflows

Discount factor

Year 1

R190,000

0.909

Year 2

R210,000

0.826

Year 3

R220,000

0.751

Year 4

R170,000

0.683

Year 5

R180,000

0.621

Cost of capital is 6%. Depreciation is R120,000 per year. Tax rate is 25%.

Required:

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

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