1. Calculate the Payback Period (expressed in years, months and days). 2. Calculate the Accounting Rate of Return on average investment (expressed to two decimal places). 3. Identify TWO (2) reasons why Umdloti Limited should not use the accounting rate of return to evaluate capital investments. 4. Calculate the Net Present Value. 5. Calculate the Internal Rate of Return (expressed to two decimal places) if the net cash flows are R320 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation.
1. Calculate the Payback Period (expressed in years, months and days). 2. Calculate the Accounting Rate of Return on average investment (expressed to two decimal places). 3. Identify TWO (2) reasons why Umdloti Limited should not use the accounting rate of return to evaluate capital investments. 4. Calculate the Net Present Value. 5. Calculate the Internal Rate of Return (expressed to two decimal places) if the net cash flows are R320 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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REQUIRED Study the information given below and answer the following questions:
1. Calculate the Payback Period (expressed in years, months and days).
2. Calculate the Accounting Rate of
3. Identify TWO (2) reasons why Umdloti Limited should not use the accounting rate of
4. Calculate the
5. Calculate the
Transcribed Image Text:INFORMATION
Umdloti Limited intends purchasing a new machine and the following details relate to this machine. Ignore taxes.
Purchase price
R1 000 000
Expected useful life
Scrap value
Minimum required rate of return
Expected net cash inflows:
Year 1
Year 2
Year 3
Year 4
Year 5
Expected net profit:
Year 1
Year 2
Year 3
Year 4
Year 5
5 years
0
15%
R250 000
R260 000
R300 000
R400 000
R380 000
R50 000
R60 000
R100 000
R200 000
R180 000
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