Question
Years and Cash flows below; Year 1 -1 000, Year 2 -1 500, Year 3 -2 000, Year 4 -1 750, Year 5 -1 500,
Years and Cash flows below; Year 1 -1 000, Year 2 -1 500, Year 3 -2 000, Year 4 -1 750, Year 5 -1 500, Year 6 -1 000, Year 7 - 500, Year 7 -500.
Ikaneng Pty (Ltd) is evaluating a project with the following cash flows: The initial investment is R6 250. The company has a required rate of return of 10 per cent. Calculate: 4.1. the payback period (4) 4.2. the discounted payback (4) 4.3. the net present value. (4) 4.4. the internal rate of return (4) 4.5. What are the main objections to the use of payback? Why does it remain a very popular method? (4)
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