Evans Corp is planning to invest in a project with the following details:Initial investment of...
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Accounting
Evans Corp is planning to invest in a project with the following details:
- Initial investment of R900,000 and an expected residual value of R80,000.
Year | Cashflows | Discount factor |
Year 1 | R140,000 | 0.909 |
Year 2 | R160,000 | 0.826 |
Year 3 | R170,000 | 0.751 |
Year 4 | R120,000 | 0.683 |
Year 5 | R130,000 | 0.621 |
Cost of capital is 10%. Depreciation is R70,000 per year. Tax rate is 30%.
Required:
- Calculate each of the following:
- 1.5.1 Accounting Rate of Return (5)
- 1.5.2 Payback period (5)
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