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Portofino Traders has investigated the possibility of investing in a new machine. The following data has been extracted from the reports relating to the project:
Portofino Traders has investigated the possibility of investing in a new machine. The following data has been extracted from the reports relating to the project: Cost of machine R200000 Expected economic life 4 years Depreciation method Straight-line REQUIRED: Calculate the following to analyse the project Portofino Traders which to invest 2.1 Accounting rate of return. (4 marks) 2.2 Payback period (years, months and days). 2.3 If the cut off period is 2 years, will the current payback period be accepted? Why? (4 marks) 2.4 Net present value (Round off the amounts to the nearest Rand). (2 marks) (8 marks) 2.5 On the basis of the calculation of the net present value, will the project be accepted? Why? (2 marks)
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