Question 3 (13 marks) The following information relates to two capital expenditure projects. Beca...
Question 3 (13 marks) The following information relates to two capital expenditure projects. Because of capital rationing, only one project can be accepted. Project A R800 000 5 years R40 000 Project B R920 000 5 years R60 000 Initial cost Expected life Expected scrap value Expected net cash inflows: End of year 1 2 3 4 5 R 320 000 280 000 260 000 240 000 220 000 R 400 000 280 000 200 000 200 000 200 000 Sebalina EXAMINER MODERATOR Page 5 of 7 Faculty of Management Sciences Department - Business Support Studies: Project Management Central University of Technology, Free State The company estimates its cost of capital is 12%. Depreciation is calculated using the straight-line method. Required 3.1 Calculate the payback period for project B. (Answer expressed in years and months) (10 marks) 3.2 Calculate the accounting rate of return for project A (Answer expressed to 2 decimal places) (3 marks)
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ACCOUNTING
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Anima Ren
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