Baker Ltd is evaluating a project with the following financial projections:Initial investment of R600,000 with...
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Accounting
Baker Ltd is evaluating a project with the following financial projections:
- Initial investment of R600,000 with an expected residual value of R50,000.
Year | Cashflows | Discount factor |
Year 1 | R110,000 | 0.909 |
Year 2 | R130,000 | 0.826 |
Year 3 | R170,000 | 0.751 |
Year 4 | R90,000 | 0.683 |
Year 5 | R100,000 | 0.621 |
Assuming a cost of capital of 9%. Cash flows are after tax with depreciation at R45,000 per year. Tax rate is 25%.
Required:
- Calculate each of the following:
- 1.2.1 Net Present Value (5)
- 1.2.2 Internal Rate of Return (5)
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