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points Save Answer ABC Ltd plan to purchase a grader for their company. The grader cost R1500000 and they hope to sell it for R200000
points Save Answer ABC Ltd plan to purchase a grader for their company. The grader cost R1500000 and they hope to sell it for R200000 after 5 years The company uses the Straight Line Depreciation method. They estimate the following returns: Determine the Accounting Rate of return. Year 1 2 3 4 5 Profit R 600000 450000 800000 257500 850000 th R Average profit Annual depreciation Average annual net profit TU 2021 Average investment Accounting Date of Datum ABC asks its credit customers to pay by the end of the month after the month of delivery in practice, customers take longer to pay on average 70 days Salos revenue amounts to R15000000 per year and bad debts to R500000 per year It is planned to offer customers a cash discount of 2% for payment within 30 days. KBC estimates that 50% of customers will accept this facility but that the rest will still only pay at 70 days after sales Al present the company has an overdraft facility at an interest rate of 16% a year if the plan goes ahead bad dobt will be rextuced to R300 000 per year and saving in credit management of R150000 per year It is also determined that the Reduction in Trade Receivables is R821917 80 Shouki KBC offer the new credit terms to customers? R R Cost of discount Less Interest saved on reduction in Trade Recewables Administration cost saving Cost of bad debts saved
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