50.1K

Verified Solution

Link Copied!

Capital Budgeting the finance department of ishka $($ pty$)$Ltd is faced with a choice between two machijes A$,$B which differ in their production characteristics and capabllities $.$the current cost of capital of the company is $12\%$ the following information regarding the two machines is available Details: cost proce, machine A : R$2000000,$machine B : $3000000,$residual value: $220000$ machine B : $320000,$ annual income after depreciation and income tax $,$machinne A :$304000,$ machine B $366000$ required working capital $,$machine A : $360000$ machine B : $440000,$ expetedd useful life : machije A : $10$ years Machine B : $10$ years required apply the following methods in capital budgeting to evaluate the two mutually exclusive options available to ishka $($pty$)$ Ltd and comment on the results of each $.1)$ net present value round off your present value interest factor to $4$ decimal place as illustrated in the table below : round off the present value amount to $2$ decimal place $.$ year cashflow present value interest factor at $12\%$ present Value year $10,8929660456\mathrm{.}232$ internal rate of return $($IRR$)$ using and $20\%$ to interpolate $($ round of your answer to $4$ decimal places $3)$ payback period $4)$ accounting rate of return B$)$ make a final recommendation to the management of ishka $($ pty$)$ Ltd based on the net present value and advice whether to invest in project A or project B$.$

Answer & Explanation Solved by verified expert

See Answer