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Silverline Services Ltd is considering a new project with the following forecasted details: Initial investment is R550,000 and the expected residual value is R20,000. Year
Silverline Services Ltd is considering a new project with the following forecasted details:
- Initial investment is R550,000 and the expected residual value is R20,000.
Year | Cashflows | Discount factor |
Year 1 | R110,000 | 0.909 |
Year 2 | R130,000 | 0.826 |
Year 3 | R100,000 | 0.751 |
Year 4 | R90,000 | 0.683 |
Year 5 | R70,000 | 0.621 |
Assuming a cost of capital of 11%. The cash flows are after tax, with depreciation at R28,000 annually. The tax rate is 29%.
Required:
- Calculate each of the following: 1.1 Accounting Rate of Return 1.2 Payback period 1.3 Net Present Value (NPV) 1.4 Discounted Payback period
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