The company estimates its cost of capital 10%

a) Calculate the payback period for each project.

b) Calculate Accounting Rate of Return for each project.

c) Calculate the Net present Value of each project.

d) Which project should be accepted? Reason up.

e) Two factors management would need to consider in addition to the financial factors before making a final decision on a project.

 

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Initial cost Expected life Scrap value expected Other information: Expected cash inflows End of year 1 2 AWN 3 4 A 400 000 4years 20 000 R 160 000 180 000 90 000 80 000 B 410 000 4years 30 000 R 140 000 140 000 140 000 240 000 Initial cost Expected life Scrap value expected Other information: Expected cash inflows End of year 1 2 AWN 3 4 A 400 000 4years 20 000 R 160 000 180 000 90 000 80 000 B 410 000 4years 30 000 R 140 000 140 000 140 000 240 000

Answer rating: 100% (QA)

amount in R a To calculate the payback period for each project we need to determine how long it takes for the cumulative cash inflows to equal or exceed the initial investment For Project A Payback pe... View the full answer