Old MathJax webview

Old MathJax webview

Question 2 Zaza an entrepreneur based in Kitwe is considering two capital expenditure proposals. Both proposals are for similar products and both are expected to operate for four years. Only one proposal can be accepted. Proposal A (K) Initial investment 46,000 Year 1 6,500 Year 2 3, 500 Year 3 13, 500 Year 4 (1, 500) Estimated scrap value at 4,000 the end of year 4 Profit/ (Loss) Proposal B (K) 46,000 4,500 2,500 4,500 14,500 4,000 Depreciation is charged on the straight line basis. The company estimates its cost of capital at 20 % per annum. (a) Calculate the following for each of the proposals. (i) The payback period (8 marks)