Question
Plant and equipment can be imported at a cost of R1 200 000 and a further R120 000 will have to be incurred on transport
Plant and equipment can be imported at a cost of R1 200 000 and a further R120 000 will have to be incurred on transport and installation costs. The plant and equipment will have a useful life of four years and will generate net profits of R75 000 per year. The plant and equipment will be depreciated on a straight-line basis over its useful life and will be written down to its scrap value of R100 000 Other information: The company has a cost of capital of 9%.Calculate the internal rate of return for option 2 using the interpolation method assuming that there is no scrap value. (Answer to be rounded to 2 decimal places) (Use interpolation method with two consecutive percentages to calculate the internal rate of return)
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