Investec Plc is preparing its annual capital budget and is considering three projects, X, Y and Z. The following financial data relates to the projects. X Y K'm K'm K'm 700 Capital expenditure 800 900 Cash inflows Year 1 200 260 100 Year 2 240 260 220 Year 3 280 260 260 Year 4 240 260 300 Year 5* 200 300 200 NPV 78 110 96 Cash inflow in year 5 include K40m scrap value for each project. Invested uses 10% cost of capital to evaluate its investments. Required; a. Calculate the following i. Discounted payback period of all projects. i. Calculate the Internal Rate of Return of project Y and Z I. .Justify why the Payback Period and Accounting Rate of Return (ARR) methods are widely used in practice.

Investec Plc is preparing its annual capital budget and is considering three projects, X, Y and Z. The following financial data relates to the projects. X Y K'm K'm K'm 700 Capital expenditure 800 900 Cash inflows Year 1 200 260 100 Year 2 240 260 220 Year 3 280 260 260 Year 4 240 260 300 Year 5* 200 300 200 NPV 78 110 96 Cash inflow in year 5 include K40m scrap value for each project. Invested uses 10% cost of capital to evaluate its investments. Required; a. Calculate the following i. Discounted payback period of all projects. i. Calculate the Internal Rate of Return of project Y and Z I. .Justify why the Payback Period and Accounting Rate of Return (ARR) methods are widely used in practice.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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