Calculate the Payback Period of Project A (expressed in years, months and days) 5.2INFORMATIONZeda 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 000Use the information provided below to calculate the Internal Rate of Return (expressed to twodecimal places) using interpolation.0R60 000R90 000R90 000R90 000R90 000R90 000 Question 5Use the information provided to answer the questions.5.1Use the information provided below to calculate the following. Where applicable, use the presentvalue 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).5.1.15.1.25.1.35.1.4Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to twodecimal 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. Motivateyour choice.

Payback Period is that period under which we will received the money which was invested by the…

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

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

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Payback period. Given the cash flow of two projects—A and B—and using the payback period decision model, which project(s) do you accept and which project(s) do you reject if you have a three-year cutoff period for recapturing the initial cash outflow? For payback period calculations, assume that the cash flow is equally distributed over the year. Cash Flow A B Cost $14,000 $110,000 Cash flow year 1 $5,600 $44,000 Cash flow year 2 $5,600 $33,000 Cash flow year 3 $5,600 $22,000 Cash flow year 4 $5,600 $11,000 Cash flow year 5 $5,600 $0 Cash flow year 6 $5,600 $0
Compute the payback period for a project with an initial cost of $100 and project cash flows of $10 for 10 years.
Calculate the capitalized cost of a project that has an initial cost of P3M. The annual operating cost will be P100,000 at the end of every year for the first five years and P160,000 thereafter. Assume i=15%.
What is the IRR of a project that involves an initial expenditure of $100,000 but results in a return of $200,000 after 10 years?
(IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $8,000 resulting in a free cash flow of $1,901 at the end of each year for the next 10 years b. An initial outlay of $8,000 resulting in a free cash flow of $2,152 at the end of each year for the next 20 years c. An initial outlay of $8,000 resulting in a free cash flow of $1,045 at the end of each year for the next 12 years d. An initial outlay of $8,000 resulting in a free cash flow of $2,894 at the end of each year for the next 5 years a. What is the IRR of a project with an initial outlay of $8,000 resulting in a free cash flow of $1,901 at the end of each year for the next 10 years? % (Round to two decimal places.)
The economic service life of a project is best described as _____________________? a. Another term for the analysis period of a benefit-cost analysis.b. The number of years for which depreciation is on-going for an asset.c. The present worth of the project after taxes.d. The amount of time (usually in years) that an asset should be used to achieve thesmallest annual cost of operation.
When calculating the annual rate of return, the average investment is equal to initial investment divided by life of project. (initial investment plus $0) divided by 2. (initial investment plus salvage value) divided by 2. initial investment divided by 2.
Determine the average rate of return for a project that is estimated to yield total income of $386,400 over four years, has a cost of $579,600, and has a $64,400 residual value.
Consider the project balances in the table below for a typical investment project with a service life of four years. An Project Balance - $13,000 - $13,000 - 11,500 CO n 0 1 2 3 4 - 2,425 (a) Determine the interest rate used in computing the project balance. The interest rate is %. (Round to the nearest whole number.) - 9,500 - 8,500 100
Average Rate of Return Determine the average rate of return for a project that is estimated to yield total income of $665,820 over six years, has a cost of $731,600, and has a $90,400 residual value. Round to the nearest whole number.
Consider the following project's after-tax cash flow and the expected annual general inflation rate during the project period: (a) Determine the average annual general inflation rate over the project period.(b) Convert the cash flows in actual dollars into equivalent constant dollarswith year 0 as the base year.(c) If the annual inflation-free interest rate is 5%, what is the present worth ofthe cash flow?
What is the payback period for project E? Data Table - X years (Round to one decimal place.) (Click on the following icon in order to copy its contents into a spreadsheet) Cash Flow Cost Cash flow year 1 Cash flow year 2 Cash flow year 3 Cash flow year 4 Cash flow year 5 Cash flow year 6 $46,000 $100,000 $20,000 $9,200 $9,200 $10,000 $9,200 $40,000 $9,200 $30,000 $9,200 $0 $9,200 $0 Print Done

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