Question
XYZ Corporation is considering investing in a project with the following forecasted details: Initial amount invested is R500,000 and expected residual value is R50,000. Year
XYZ Corporation is considering investing in a project with the following forecasted details: Initial amount invested is R500,000 and expected residual value is R50,000.
Year | Cashflows | Discount factor |
Year 1 | R100,000 | 0.909 |
Year 2 | R180,000 | 0.826 |
Year 3 | R160,000 | 0.751 |
Year 4 | R100,000 | 0.683 |
Year 5 | R90,000 | 0.621 |
Assuming that the cost of capital for the company is 10%. The cash flows are after tax and depreciation is charged at R40,000 per year. Tax rate is 30%.
Required: 1.1 Calculate each of the following: 1.1.1 Accounting Rate of Return 1.1.2 Payback period
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Corporate Financial Management
Authors: Glen Arnold
5th edition
978-1292178066, 129217806X, 273758837, 978-0273758839
