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QUESTION 2 (20) As a financial manager of Xerox Enterprises, you are required to analyse two proposed capital investments, Projects A and B. Each has
QUESTION 2 (20) As a financial manager of Xerox Enterprises, you are required to analyse two proposed capital investments, Projects A and B. Each has a cost of R100 000, and the cost of capital for each project is 12%. Depreciation on each project is estimated at R25 000 per year. The projects' expected profit are as follows: Project A Project Year R40 000 R10 000 2 R5 000 R10 000 R5 000 R10 000 (R15 000) R10 000 1 3 4 Required 2.1 Calculate the payback period for each project (In years, months and days). 2.2 Calculate the NPV for each project. 2.3 Indicate with a reason which project should be chosen by Xerox Enterprises. 2.4 Calculate the ARR for project A. (8) (8) (1) (3)
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