Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please give a breakdown of how the calcultions were done. (20) QUESTION 2 INFORMATION: Vista Limited intends purchasing a new machine and has a choice
Please give a breakdown of how the calcultions were done.
(20) QUESTION 2 INFORMATION: Vista Limited intends purchasing a new machine and has a choice between the following two machines: Equipment A Equipment B Initial cost R220 000 R240 000 Expected useful life 5 years 5 years Scrap value Nil NII Expected net cash inflows: R R End of: Year 1 55 000 70 000 Year 2 60 000 70 000 Year 3 62 000 70 000 Year 4 60 000 70 000 Year 5 70 000 70 000 The company estimates that its cost of capital is 12%. Required: 2.1 Calculate the Payback period of both equipment. (Answers must be expressed in years, months and days), (4) 2.2 Calculate the Accounting Rate of Return (on initial investment) for both equipment A and B. (Answers must be expressed to 2 decimal places). (5) (6) 2.3 Calculate the Net Present Value of each equipment. (Round off amounts to the nearest Rand.) (5) 2.4 Calculate the Internal Rate of Return of Equipment B 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