Question
Transload Pty Ltd is a haulage company involved in cross border transport services. The company is looking into expanding to new markets in Africa and
Transload Pty Ltd is a haulage company involved in cross border transport services. The company is looking into expanding to new markets in Africa and has tasked you with the analysis and evaluation of the new projects profitability. The companys required rate of return is 11%. You are given that the new expansion project requires an outlay of R6 000 000 to purchase haulage trucks and is expected to last for 7 years. Depreciation is charged evenly on cost basis and the tax rate is 28%. The cash flows of the business are as follows: Year 1 R1150000 Year 2 R1270000 Year 3 R1300000 Year 4 R1210000 Year 5 R1320000 Year 6 R1325000 Year 7 R1325000 Year 8 R1300000
1.1 Calculate the Accounting rate of return for the project.
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