This is my Management accounting Quiz Need Answers for the following;

1. Windhoek Mines Ltd. of Namibia is contemplating the purchase of equipment to exploit a mineral deposit located on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area:

Cost of new equipment and timbersR200,500Working capital required75,000Net annual cash receipts90,000*Cost to construct new roads in three years30,000Salvage value of equipment in four years48,750

*Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth.

(The currency in Namibia is the rand, here denoted by R.)

It is estimated that the mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's discount rate is 20%.

Click here to viewExhibit 10-1andExhibit 10-2, to determine the appropriate discount factor(s) using tables.

Required:

1-a.Determine the NPV of the proposed mining project.(Negative amount should be indicated with a minus sign. Round discount factor(s) to 3 decimal places. Round other intermediate calculations and final answer to the nearest whole number.)

1-b.Should the project be accepted?

multiple choice

• Yes
• No

Second Question

Perrot Industries has $325,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives follow:

ProjectABCost of equipment required$270,000Working capital investment required$270,000Annual cash inflows67,65054,400Salvage value of equipment in six years21,200Life of the project6years6years

The working capital needed for project B will be released at the end of six years for investment elsewhere. Perrot Industries' discount rate is 14%.

Click here to viewExhibit 10-1andExhibit 10-2, to determine the appropriate discount factor(s) using tables.

Required:

1-a.Calculate net present value for each project.(Round discount factor(s) to 3 decimal places. Round other intermediate calculations and final answer to the nearest whole number.)

Third Question

The management of Revco Products is exploring five different investment opportunities. Information on the five projects under study follows:

Project Number12345Investment required$(270,000)$(450,000)$(400,000)$(360,000)$(480,000)Present value of cash inflows at a 10% discount rate336,140522,970379,760433,400567,270Net present value$66,140$72,970$(20,240)$73,400$87,270Life of the project6 years3 years5 years12 years6 years

The company's required rate of return is 10%; thus, a 10% discount rate has been used in the preceding present value computations. Limited funds are available for investment, and so the company cannot accept all of the available projects.

Required:

1.Compute the profitability index for each investment project.(Round your answers to 2 decimal places.)

2.Rank the five projects according to preference, in terms of (a) net present value, (b) profitability index.

3.Which ranking do you prefer?

multiple choice

• Net present value
• Profitability index