Use the information provided to answer the questions.Use the information provided below to calculate the following. Where applicable, use the presentvalue tables provided in APPENDICES 1 and 2 1. Calculate the Payback Period of Project A (expressed in years, months and days).2. Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to twodecimal places). INFORMATIONZeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest inone of them. You are given the following projected data:Initial costScrap valueDepreciation per yearNet profitYear 1Year 2Year 3Year 4Year 5Net cash flowsYear 1Year 2Year 3Year 4Year 5Additional informationThe discount rate used by the company is 12%.Project AR300 000R40 000R52 000R20 000R30 000R50 000R60 000R10 000Project BR300 0000R60 000R90 000R90 000R90 000R90 000R90 000 PFE4.a.M11U11N1"=DAN10SKATAURWCOMSUPE172113004Ann2OnNASAWNOWLAPPENDIX 2: PRESENT VALUE OF A REGULAR ANNUITY OF R1 PER PERIOD FOR N PERIODS

The payback period is used for project evaluation as it calculates the time required by the cash…

Answered: Calculate the Payback Period of Project…

Calculate the Payback Period of Project A (expressed in years, months and days). 2. Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to two decimal places).

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 52P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

100%

Use the information provided to answer the questions.
Use the information provided below to calculate the following. Where applicable, use the present
value tables provided in APPENDICES 1 and 2
1. Calculate the Payback Period of Project A (expressed in years, months and days).
2. Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to two
decimal places).

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
Additional information
The discount rate used by the company is 12%.
Project A
R300 000
R40 000
R52 000
R20 000
R30 000
R50 000
R60 000
R10 000
Project B
R300 000
0
R60 000
R90 000
R90 000
R90 000
R90 000
R90 000

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E
4
.
a
.
M
11
U
11
N
1
"
=
DAN
10
SKAT
AUR
W
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SUPE
1721
13004
Ann
2
On
NASA
W
NOWL
APPENDIX 2: PRESENT VALUE OF A REGULAR ANNUITY OF R1 PER PERIOD FOR N PERIODS

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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