State what value for each of the above four expenditures will be included in the capitalised cost of the ERP system. Write down only the amounts. (If the amount to be included is NIL in your opinion, then write down NIL).
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Waikiki Trading Ltd incurred the following project expenditures in
respect of a new ERP system in the development phase:
Salaries of IT employees working exclusively on the project:
R670 000
Employee awareness leaflets: R32 000
General
Specialist consultancy service: R432 000
State what value for each of the above four expenditures will be
included in the capitalised cost of the ERP system. Write down
only the amounts. (If the amount to be included is NIL in your
opinion, then write down NIL).
Step by step
Solved in 2 steps
- Project R delegates all the development work to outside companies. The estimated cashflows for Project R are (where brackets indicate expenditure):Beginning of Year 1 (£150,000) (contractors’ fees)Beginning of Year 2 (£250,000) (contractors’ fees)Beginning of Year 3 (£250,000) (contractors’ fees)End of Year 3 £1,000,000 (sales)Project S carries out all the development work in-house by purchasing the necessary equipment and using the company’s own staff. The estimated cashflows for Project S are:Beginning of Year 1 (£150,000) (New equipment)Continuous payments Through Year 1 (£75,000) (Staff Cost)Continuous payments Through Year 2 (£250,000) (Staff Cost)Continuous payments Through Year 3 (£250,000) (Staff Cost)End of Year 3 £1,000,000 (sales) Find the internal rate of return for Project R and Project S and hence determine which project is more favourable using this criterion.Project R delegates all the development work to outside companies. The estimated cashflows for Project R are (where brackets indicate expenditure): Beginning of Year 1 (£150,000) (contractors’ fees) Beginning of Year 2 (£250,000) (contractors’ fees) Beginning of Year 3 (£250,000) (contractors’ fees) End of Year 3 £1,000,000 (sales) Project S carries out all the development work in-house by purchasing the necessary equipment and using the company’s own staff. The estimated cashflows for Project S are: Beginning of Year 1 (£150,000) (New equipment) Continuous payments Through Year 1 (£75,000) (Staff Cost) Continuous payments Through Year 2 (£250,000) (Staff Cost) Continuous payments Through Year 3 (£250,000) (Staff Cost) End of Year 3 £1,000,000 (sales) a) Calculate the net present value for Project R and Project S using a risk discount rate of 20% per annum. Using net present values as a criterion, which project is preferable? b) Find the internal rate of return for Project R and…Project R delegates all the development work to outside companies. The estimated cashflows for Project R are (where brackets indicate expenditure):Beginning of Year 1 (£150,000) (contractors’ fees)Beginning of Year 2 (£250,000) (contractors’ fees)Beginning of Year 3 (£250,000) (contractors’ fees)End of Year 3 £1,000,000 (sales)Project S carries out all the development work in-house by purchasing the necessary equipment and using the company’s own staff. The estimated cashflows for Project S are:Beginning of Year 1 (£150,000) (New equipment)Continuous payments Through Year 1 (£75,000) (Staff Cost)Continuous payments Through Year 2 (£250,000) (Staff Cost)Continuous payments Through Year 3 (£250,000) (Staff Cost)End of Year 3 £1,000,000 (sales) Calculate the net present value for Project R and Project S using a risk discount rate of 20% per annum. Using net present values as a criterion, which project is preferable?
- PW(benefits) PW(operating and maintenance costs) PW(capital cost) Project A £17 000 000 5 000 000 6 000 000 Project B £17 000 000 11 000 000 1 000 000 (a) Compute the benefit-cost ratios for both projects. (b) Compute the modified benefit-cost ratios for both projects. (c) Compute the benefit-cost ratio for the increment between the projects. (d) Compute the present worths of the two projects. (e) Which is the preferred project? Explain.In an energy systems installation, following financial requirement was identified. Capital cost of equipment and installation - $ 150,000 Recurrent cost of maintenance Replacement of parts Life time of the system Income through energy generation i. iii. -$5,000 per year -$4,000 per year - 12 years - $ 22,000 per year Calculate the payback period of the system. If the scarp value of the equipment is $ 5,000, determine is the net profit expected to be collected for the investment? Explain how this profit is affected by "cost of money" or "interest". No calculations needed.Company A has provided figures for two investment projects, only one of which may be chosen. These are the calculations based on the figures: Payback Period The Accounting Rate of Return / Return on Capital Employed Net Present Value Project A 2 years 4 months 27.08% £63,705 Project B 2 years 7 months 39.47% £74.971 Analyse and provide recommendations as to what project needs to be chosen based on the calculations above.
- The total research and development costs of P200,000 incurred to develop the new product is a/an choices postponable cost relevant cost sunk cost avoidable costBluestone Ltd has provided the following figures for two investment projects, only one of which may be chosen. Project A Project B £ £ Initial outlay 190,000 170,000 Profit for year 1 55,000 15,000 2 40,000 25,000 3 25,000 45,000 4 10,000 65,000 Estimated resale value at end of year 4 50,000 20,000 Profit is calculated after deducting straight line depreciation. The business has a cost of capital of 10%. a) Calculate the payback period, net present value and accounting rate of return for each project, and provide brief recommendations as to what project needs to be chosen based on the following: The Payback Period. The Accounting Rate of Return/Return on Capital Employed. The Net Present Value.A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B:A BInitial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6%1. Ascertain the preferred project using:a. The profit comparison method. b. The average rate of return method. c. The static payback method 2. Re-evaluate the projects using the Net Present Value. Are the results of the Project selection process the same? If different, what reasons can you offer?
- A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B:A BInitial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6% 1. Evaluate the projects using the Net Present Value.Its required to select one of the two machines, if you know that the firms MARR-12% and if the costs are shown below: Project A Project B Initial cost, $ 7650 12900 Maintenance cost, S/year 1200 900 Salvage value, $ 2000 Economic life, year 4 Compare the two-alternative using: 1-Equavlent Annual worth comparison. 2- Present worth comparisonPlease no written by hand and no emage The following data are available for two mutually exclusive projects: Project A $16,900,000 PW(benefits) PW(operating and maintenance costs) PW(capital cost) 4,700,000 7,600,000 Complete parts (a) through (e) below. a. Compute the benefit-cost ratios for both projects. Project B $15,100,000 9,300,000 3,000,000 The ratios for projects A and B, respectively, are 1.374 and 1.228 (Type integers or decimals rounded to three decimal places as needed.) b. Compute the modified benefit-cost ratios for both projects. The ratios for projects A and B, respectively, are 1.605 and 1.933 (Type integers or decimals rounded to three decimal places as needed.) c. Compute the benefit-cost ratio for the increment between the projects. Select the correct choice below and, if necessary, fill in the answer box to complete your choice. OA. The ratio is (Type an integer or decimal rounded to three decimal places as needed.) B. The ratio is undefined. d. Compute the…
