Use the information provided below to answer the following questions: 5.1 5.2 5.3 5.4 5.5 Calculate...

 

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Use the information provided below to answer the following questions: 5.1 5.2 5.3 5.4 5.5 Calculate the Payback Period of Machine B (expressed in years, months and days). Calculate the Accounting Rate of Return (on average investment) of both machines (expressed to two decimal places). Calculate the Net Present Value of each machine. Which machine should be chosen if the time value of money is taken into account? Why? Calculate the Internal Rate of Return of Machine B using interpolation (expressed to two decimal places), if the net cash flows are R140 000 per year for five years. INFORMATION Salsa Limited intends purchasing a new machine and has a choice between two machines, of which only one can be chosen. The following information pertaining to the two machines is available: Initial cost Cost of capital Expected economic life Expected disposal value Depreciation per year Expected net profit: Year 1 Year 2 Year 3 Year 4 Year 5 Machine A R500 000 14% 5 years R50 000 R90 000 R50 000 R60 000 R70 000 R80 000 R20 000 Machine B R500 000 14% 5 years 0 R100 000 R60 000 R60 000 R60 000 R60 000 R60 000 Use the information provided below to answer the following questions: 5.1 5.2 5.3 5.4 5.5 Calculate the Payback Period of Machine B (expressed in years, months and days). Calculate the Accounting Rate of Return (on average investment) of both machines (expressed to two decimal places). Calculate the Net Present Value of each machine. Which machine should be chosen if the time value of money is taken into account? Why? Calculate the Internal Rate of Return of Machine B using interpolation (expressed to two decimal places), if the net cash flows are R140 000 per year for five years. INFORMATION Salsa Limited intends purchasing a new machine and has a choice between two machines, of which only one can be chosen. The following information pertaining to the two machines is available: Initial cost Cost of capital Expected economic life Expected disposal value Depreciation per year Expected net profit: Year 1 Year 2 Year 3 Year 4 Year 5 Machine A R500 000 14% 5 years R50 000 R90 000 R50 000 R60 000 R70 000 R80 000 R20 000 Machine B R500 000 14% 5 years 0 R100 000 R60 000 R60 000 R60 000 R60 000 R60 000

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The answer is as follows Ans 51 Payback period refers to the time period in which the amount invested will be recovered back by net cash inflows of th... View the full answer