FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Calculate the following from the information given Fego Ltd:
1. Payback Period (expressed in years, months and days).
2. Accounting Rate of Return on initial investment (expressed to two decimal places).
3. Internal Rate of Return (expressed to two decimal places) if the net cash inflows are R400 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation.

Fego Limited is considering the purchase of Machine X, details of which are provided below:
Year
R
Initial investment
Net cash inflows:
0
(1 500 000)
1
480 000
2
600 000
3
380 000
4
272 000
5
360 000
The cost of capital is 12%. Depreciation is calculated using the straight-line method. No scrap value is
expected for the machine. Ignore taxes.
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Transcribed Image Text:Fego Limited is considering the purchase of Machine X, details of which are provided below: Year R Initial investment Net cash inflows: 0 (1 500 000) 1 480 000 2 600 000 3 380 000 4 272 000 5 360 000 The cost of capital is 12%. Depreciation is calculated using the straight-line method. No scrap value is expected for the machine. Ignore taxes.
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