Question
Canny Construction is looking to invest in new construction equipment. The following information has been extracted from reports relating to the project Investment R90 000
Canny Construction is looking to invest in new construction equipment. The following information has been extracted from reports relating to the project
Investment R90 000
Average Annual Profit R 26 667
Life span 3 YEARS
Minimum required rate of return 10 %
Cash flow:
1st Year R90 000
2nd Year R400 000
3rd Year R110 000
Required
2.1 Calculate the accounting rate of return on average investment
2.2 Calculate the payback period (Answer in years, months, and days).
2.3 Calculate the Net Present Value ( Round off amounts to the nearest Rand)
2.4 Would the project be acceptable at a cost of capital of 12%? Motivate your answer with an appropriate calculation that takes into consideration the time value of money
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