Question
Marks: STION ONE Astra Ltd intend investing in a new machine. The following details relating to the machine apply: Cost of machine Expected useful life
Marks: STION ONE Astra Ltd intend investing in a new machine. The following details relating to the machine apply: Cost of machine Expected useful life Scrap value Method of depreciation Cost of capital Year 1 2 3 FINANCIAL MANAGEMENT fo e 25 5 Profit 'R' 6 000 18.000 100 000 66 000 112 000 R360 000 5 years R 60 000 Straight-line 12% cequired: 1.1 Calculate the pay-back period 1.2 Calculate the accounting rate of return (ARR) 13 Comment on the above returns taking into account that Astra Ltd requires a payback period of 3 years and a return of at least 40%. 12 The following information relates to two projects, Project Alpha and Project Omega from which one must be chosen by Delta Construction Ltd. (8) (5) (2)
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