The following project is being considered by the management of Pepi Industries Ltd: Cost of project...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The following project is being considered by the management of Pepi Industries Ltd: Cost of project R320 000 5 years Expected economic life Depreciation method Straight-line 14% Cost of capital Details of the after tax net profit and cash flows are as follows: Year Net profit Cash flows Rand Rand 12345 Required: 1.1 1.2 1.3 2 000 6 000 40 000 116 000 16 000 66 000 70 000 104 000 180 000 80 000 Calculate the returns the project would earn, using the following investment appraisal techniques: 1.1.1 Accounting rate of return (two decimal places) 1.1.2 Payback period (years, months and days). 1.1.3 Net present value (round off amounts to the nearest Rand). Explain whether the payback period would be accepted if the current cut off period is 4 years Explain whether the project will be accepted on the basis of the net present value. (5) (6) (8) The following project is being considered by the management of Pepi Industries Ltd: Cost of project R320 000 5 years Expected economic life Depreciation method Straight-line 14% Cost of capital Details of the after tax net profit and cash flows are as follows: Year Net profit Cash flows Rand Rand 12345 Required: 1.1 1.2 1.3 2 000 6 000 40 000 116 000 16 000 66 000 70 000 104 000 180 000 80 000 Calculate the returns the project would earn, using the following investment appraisal techniques: 1.1.1 Accounting rate of return (two decimal places) 1.1.2 Payback period (years, months and days). 1.1.3 Net present value (round off amounts to the nearest Rand). Explain whether the payback period would be accepted if the current cut off period is 4 years Explain whether the project will be accepted on the basis of the net present value. (5) (6) (8)
Expert Answer:
Answer rating: 100% (QA)
11 Investment appraisal techniques 111 Accounting rate of return The accounting rate of return is ca... View the full answer
Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Posted Date:
Students also viewed these accounting questions
-
The replacement of a planing machine is being considered by the Reardorn Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $30,000 for...
-
The following project is at the end of its sixth week. Find the cost and schedule variances. Also find the CPI and SPI. Then find the critical ratio of the project using earned value calculations....
-
Consider an investment project whose cash flows are as in Table P7.24. TABLE P7.24 n Net Cash Flow 0 .................... $8,000 1.................... 10,000 2.................... 30,000...
-
Jeremy acquired the following ordinary shares in Scarlon plc: He made no further acquisitions during 2021. On 22 December 2020, he sold 10,000 shares in the company for 10 per share. Calculate the...
-
Arsenic enters drinking water supplies from natural deposits in the earth or from agricultural and industrial practices. Since it has been linked to cancer of the bladder, kidney, and other internal...
-
In problem, convert each angle in degrees to radians. Express your answer as a multiple of . 270
-
Consider the simple linear regression model fit to the toluene-tetralin viscosity data in Problem 2.15. Problem 2.15 Byers and Williams ("Viscosities of Binary and Ternary Mixtures of Polynomatic...
-
Identify types of organizations that may need to evaluate strategy more frequently than others. Justify your choices.
-
How does the integration of transformational leadership principles enhance organizational efficacy in a dynamic, globalized marketplace ? Explain
-
1. Cost out these packages given the data in Exhibits 1 and the information obtained from various insurance carriers and other information sources (Exhibit 4). Exhibit 1: Current compensation costs...
-
Several species of bacteria, Including Geobacter metallireducens, have been shown to "eat" electrons, bypassing the usual process of metabolizing sugar to obtain energy. During t already have...
-
What are the three major challenges facing the modern world?
-
People who are high in Machiavellianism (high Machs) often come out ahead in dealing with others because they are true pragmatists. That is, they tend to be willing to do or say whatever it takes to...
-
Given that yield-management methods require an accurate forecast of demand, critically assess methods by which an airline can forecast demand for flights across its route network for the following...
-
Two brothers who have both run major companies? Thats certainly a rarity in the modern world of business. But it is exactly the situation for the Smith brothers, John F. and Michael. John is vice...
-
Aside from rational persuasion, what techniques of influence do you believe are used most often in organizations? Why are these particular techniques used more frequently than others?
-
NoLeverage is a firm financed entirely with equity and Leverage is a firm financed with 50-50 equity and debt, but otherwise the two firms are identical. Both firms have an annual EBIT of $1 million...
-
1. Use these cost, revenue, and probability estimates along with the decision tree to identify the best decision strategy for Trendy's Pies. 2. Suppose that Trendy is concerned about her probability...
-
A drug store is looking into the possibility of installing a "24/7" automated prescription refill system to increase its projected revenues by $20,000 per year over the next five years. Annual...
-
This case study is a justification of a computer system for, the ABC Company. The following are known data: The combined initial hardware and software cost is $80,000. Contingency costs have been...
-
Wilbur is a college student who desires to establish a long-term Roth IRA account with $4,000 that his grandmother gifted to him. He intends to invest the money in a mutual fund that earns an...
-
A container of an organic liquid a $25^{\circ} \mathrm{C}$ has a mass of $1100 \mathrm{~kg}$ and a volume of $0.94 \mathrm{~m}^{3}$. Find the liquid's weight, its density, and its specific gravity.
-
What is the pressure one mile $(1.6 \mathrm{~km})$ beneath the ocean's surface?
-
A vertical, cylindrical tank with a diameter of $10 \mathrm{~m}$ and a depth of $4 \mathrm{~m}$ is filled to the top with water at $25^{\circ} \mathrm{C}$. If the water is heated to $60^{\circ}...
Study smarter with the SolutionInn App