Question
Casio Limited is considering investing in new machinery and the following information is available: (25 Marks) Investment Cost of capital Scrap value Year 1 Year
Casio Limited is considering investing in new machinery and the following information is available: (25 Marks) Investment Cost of capital Scrap value Year 1 Year 2 Year 3 Year 4 Year 5 Additional Information: The cost of the investment is R300 000 Cost of capital = 12% There is no scrap value Required: R300 000 12% Nil Net profit R 13 000 10 000 28 000 37 000 75 000 Answer the following questions based on the information given above. 3.1 Calculate the accounting rate of return. (Answer expressed to two decimal places) 3.2 Calculate the payback period. (Answer in years, months and days) 3.3 If a payback period of 4 years is required, will the project be accepted? Why? 3.4 Calculate the net present value. (Amounts rounded off to the nearest Rand) 3.5 Based on the NPV, would the project be accepted? Why
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started