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QUESTION 2 Machine A Machine B Initial cost R100 000 R110 000 5 years 5 years R10 000 0 Expected economic life Expected
Posted: Sun May 08, 2022 10:04 am
by answerhappygod
- Question 2 Machine A Machine B Initial Cost R100 000 R110 000 5 Years 5 Years R10 000 0 Expected Economic Life Expected 1 (57.15 KiB) Viewed 26 times
QUESTION 2 Machine A Machine B Initial cost R100 000 R110 000 5 years 5 years R10 000 0 Expected economic life Expected disposal/residual value Expected net cash inflows End of: Year 1 Year 2 R R 33 000 34000 27 000 33 000 Year 3 Year 4 32 000 30 000 26000 18 000 33 000 33 000 33 000 22 000 Year 5 Depreciation per year The company estimates that its cost of capital is 14%. 2.1 Calculate the payback period for Machine A and B (answers must be expressed in years, months and days) (5 marks) 2.2 (4 marks) Calculate the accounting rate of return on average investment) for Machine A. (answer rounded off to 2 decimal places). 2.3 Calculate the net present value of each machine (round off amounts to the nearest Rand). (6 marks) 2.4 Calculate the internal rate of return for Machine B. (5 marks)