Facebook Ltd is considering investing in a new virtual reality project with the following forecasted...
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Accounting
Facebook Ltd is considering investing in a new virtual reality project with the following forecasted details: Initial amount invested is R1,000,000 and expected residual value is R90,000.
Year | Cashflows | Discount factor |
Year 1 | R300,000 | 0.909 |
Year 2 | R310,000 | 0.826 |
Year 3 | R320,000 | 0.751 |
Year 4 | R330,000 | 0.683 |
Year 5 | R340,000 | 0.621 |
Assuming that the cost of capital for the company is 13%. The cash flows are after tax and depreciation is charged at R100,000 per year. Tax rate is 30%.
Required:
Calculate each of the following: 1.1.1. Net Present Value (NPV) (10) 1.1.2. Payback period (5)
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