3.4 Benefit Cost Ratio of Project B (answer expressed to three decimal places). 3.5 Internal Rate of Return of Project B (answer expressed to two decimal places). INFORMATION Your company has the option to invest in machinery in Project A or Project B but finance is only available to invest in one of them. You are given the following projected data: Net cash inflows Net profit Project B Project A Project B Project A R. R. R. Year 1 65 000 80 000 5 000 20 000 Year 2 85 000 80 000 25 000 20 000 Year 3 93 000 80 000 33 000 20 000 Year 4 89 000 80 000 29 000 20 000 Year 5 133 000 80 000 73 000 20 000 Additional information 1. The initial cost of machinery for each project is R300 000. 2. No scrap values are expected for the projects. 3. The discount rate to be used by the company is 12%.

3.4 Benefit Cost Ratio of Project B (answer expressed to three decimal places). 3.5 Internal Rate of Return of Project B (answer expressed to two decimal places). INFORMATION Your company has the option to invest in machinery in Project A or Project B but finance is only available to invest in one of them. You are given the following projected data: Net cash inflows Net profit Project B Project A Project B Project A R. R. R. Year 1 65 000 80 000 5 000 20 000 Year 2 85 000 80 000 25 000 20 000 Year 3 93 000 80 000 33 000 20 000 Year 4 89 000 80 000 29 000 20 000 Year 5 133 000 80 000 73 000 20 000 Additional information 1. The initial cost of machinery for each project is R300 000. 2. No scrap values are expected for the projects. 3. The discount rate to be used by the company is 12%.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.1.1MBA

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Question 5 Use the information provided to answer the questions. 5.1 Use the information provided below to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. Calculate the Payback Period of Project A (expressed in years, months and days). 5.1.1 5.1.2 5.1.3 5.1.4 Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to two decimal places). Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). Use your answers from question 5.1.3 to recommend the project that should be chosen. Motivate your choice.
QUESTION 3 Answer the questions from the information provided. Where applicable, use the present value tables that appear in the module guide. 3.1 REQUIRED Calculate the following for both projects from the information provided below: 3.1.1 Payback Period (expressed in years, months and days) 3.1.2 Accounting Rate of Return on average investment (expressed to two decimal places). INFORMATION Mentos Ltd had to choose between two projects, Alpha and Beta, for which the following profits and net cash inflows are forecast: Year 1 2 3 4 Net profit per year Alpha R53 000 R53 000 R53 000 R53 000 Beta R45 000 R65 000 R85 000 R95 000 Net cash inflow per year Beta Alpha R128 000 R128 000 R128 000 R128 000 Each project requires an investment of R300 000. Both projects have no salvage value. R120 000 R140 000 R160 000 R170 000
Question 5 Use the information provided to answer the questions. 5.1 Use the information provided below to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 5.1.1 Calculate the Payback Period of Project A (expressed in years, months and days). 5.1.2 Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to two decimal places). 5.1.3 Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). 5.1.4 Use your answers from question 5.1.3 to recommend the project that should be chosen. Motivate your choice. INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in one of them. You are given the following projected data: Initial cost Scrap value Depreciation per year Net profit Year 1 Year 2 Year 3 Year 4 Year 5 Net cash flows Year 1 Year 2 Year 3 Year 4 Year 5 Project A…
QUESTION 2 REQUIRED Use the information given below to calculate the following: 2.1 Payback Period of Project B (answer expressed in years, months and days). 2.2 Accounting Rate of Return (on average investment) of Project B (answer expressed to two decimal places). 2.3 Net Present Value of Project A (amounts rounded off to the nearest Rand.) 2.4 Internal Rate of Return of Project B, if the net cash flows are R120 000 per year for five years (answer expressed to two decimal places). INFORMATION The following information relates to two capital investment projects: Project A Project B Initial cost R400 000 R400 000 Expected useful life 5 years 5 years Scrap/Residual value R40 000 Depreciation per year R72 000 R80 000 Expected annual profits: R R End of: Year 1 100 000 45 000 Year 2 60 000 45 000 Year 3 50 000 45 000 Year 4 30 000 45 000 Year 5 20 000 45 000 The company estimates that its cost of capital is 15%.
QUESTION 4 REQUIRED Use the information provided below to calculate the following: 4.1 Payback Period of Project B (answer expressed in years). 4.2 Return on investment of Project A (answer expressed to two decimal places). 4.3 Net Present Value of both projects. 4.4 Internal Rate of Return of Project B (answer expressed to two decimal places). INFORMATION The following information relates to two capital expenditure projects. Because of capital rationing, only one project can be accepted. Project A R1 000 000 Project B R1 000 000 Initial cost Expected life Scrap value (not included in the figures below) Average annual profit 5 years 5 years R20 000 R92 000 R90 000 Expected net cash inflows: R. R. End of year. 240 000 290 000 260 000 290 000 3 280 000 290 000 4 360 000 290 000 5 300 000 290 000 The company estimates that its cost of capital is 12%.
3.1 Calculate the payback period for both projects each (year, month and days)3.2 Calculate the accounting rate of return for each project.3.3 Use the net present value (NPV) method to determine which project should be chosen.3.4 Briefly discuss the merits of using the NPV method
Can I please have the answers in these format : payback period = investement net annual inflow ARR = Average annual profit x 100 Average investment 1 can I have the answers in these type of format
QUESTION 2 REQUIREDStudy the information given below which was made available by Levis Limited and calculatethe following:2.1 Accounting Rate of Return on average investment of Project A (answerexpressed to two decimal places). 2.2 Net Present Value of Project A (amounts rounded off to the nearest Rand.) 2.3 Internal Rate of Return of Project B (answer expressed to two decimalplaces). INFORMATIONThe following information relates to two capital investment projects, under consideration byLevis Limited for 2021:Project A Project BInitial cost R800 000 R800 000Expected useful life 5 years 5 yearsScrap/Residual value (not included in the figures below) R80 000 0Expected annual profits: R REnd of: Year 1Year 2Year 3Year 4Year 5140 000130 000120 000110 000100 000105 000105 000105 000105 000105 000The company estimates that its cost of capital is 15%. The straight-line method ofdepreciation is used.
Compute for the benefit ratio of the following projects. Project cost Gross income Operating cost Life of project Interest rate O a. 1.20 O b. 1.70 O c. 1.07 O d. 1.02 5,000,000 2,000,000 1,000,000 20 years 10%
Question 3 Given 10% discount rate, what is the profitability index of the investment project described below? 1.00 0.90 0.95 1.03 1.09 Question 4 What is the best method to use when expressing investment profitability as a percentage? Pick from the answers given below. Payback period Discounted payback period NPV AAR IRR
The following table contains information about four projects in which Morales Corporation has the opportunity to invest. This information is based on estimates that different managers have prepared about their potential project. E (Click the icon to view the projects information.) Requirements 1. Rank the four projects in order of preference by using the a. net present value. d. payback period. 2. Which method(s) do you think is best for evaluating capital investment projects in general? Why? c. internal rate of return. b. project profitability index. e. accounting rate of return. Requirement 1. Rank the projects in order of preference. (a) (b) (c) (d) (e) Net Present Profitability Internal Rate Payback Accounting Rate Value Index of Return Period of Return 1st preferred A C 2nd preferred 3rd preferred C 4th preferred ADB D AB
Question The following economical indictors are referring to types of project (A and B). Answer the following points according to these given indictors in the tables. project A:r=8% project B: r=8% year cash flow (CF) year cash flow (CF) 0 -598 0 -384 1 110 1 105 2 170 2 105 3 210 3 95 4 320 4 118 A) If you are aware that( r%) percentages are various for different reasons to be (10% and 20%). So determine level of NPV during your analysis procedures for whole the mentioned cases of (% r) for each project? B) Which one of the mentioned project are more economically by using concept of IRR and take the range of (% r) between (9% to %25) for supporting your answers? C) Drawing out all the levels of various of the project for each cases of (r %) which given initially in point (A) above. D) Give clear justification about any of the above project more feasible?