QUESTION 5 Note: Where discount factors are required, use only the present value tables ( Appendix 1
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Question:
QUESTION
Note: Where discount factors are required, use only the present value tables Appendix and that appear after QUESTION
REQUIRED
Study the information provided below and answer the following questions:
Calculate the payback period expressed in years, months and days
Explain why you would not recommend payback period to evaluate capital investment
Calculate the Accounting Rate of Return on average investment expressed to two decimal places
Calculate the Net Present Value. Your answer must include the calculations of the present values and NPV
Based on the present value of the machine, should Wagner Limited consider purchasing this machine? Why
Calculate the internal Rate of Return expressed to two decimal places if the net cash flows are R per year and there is no scrap value. Your answer must include two net present value calculations using consecutive ratespercentages and interpolation
Information
Wagner Limited intends purchasing a new machine and the following details relate to this machine
Purchase price R
Expected useful life years
Scrap value not included in the net cash flows below R
Minimum required rate of return
Expected net cash flows R
Year
Year
Year
Year
Year
Expected net profit loss R
Year
Year
Year
Year
Year
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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