INFORMATION Hattingh Limited has the option to invest in machinery in Projects A and B but...

70.2K

Verified Solution

Question

Accounting

INFORMATION Hattingh Limited has the option to invest inmachinery in Projects A and B but finance is only available toinvest in one of them. You are provided with the followingprojected data: Project A Project B Initial cost 500 000 500 000Year 1 120 000 150 000 Year 2 160 000 150 000 Year 3 170 000 150000 Year 4 180 000 150 000 Year 5 150 000 150 000 Depreciation peryear 90 0000 100 000 Additional information 1. Project A machineryis expected to be disposed of at the end of year 5 with a scrapvalue of 50 000 (not included in the figures above) 2. Project Bmachinery is not expected to have any scrap value. 3. The discountrate to be used by the company is 15%. QUESTION 1 • Calculate thePayback Period of Project A (answer expressed in years, months anddays). • Calculate the Accounting Rate of Return (on averageinvestment) of Project A (answer expressed to two decimal places).• Calculate the Benefit Cost Ratio of Project A (answer rounded offto three decimal places). • Calculate the Internai Rate of Returnof Project B (answer expressed to two decimal places).

Answer & Explanation Solved by verified expert

4.1 Ratings (551 Votes)

Discounted Cash Inflow Actual Cash Inflow 1 in Where i is the discount rate 15 n is the period to which the cash inflow relates Actual cash flow 0 1 2 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

INFORMATION Hattingh Limited has the option to invest inmachinery in Projects A and B but finance is only available toinvest in one of them. You are provided with the followingprojected data: Project A Project B Initial cost 500 000 500 000Year 1 120 000 150 000 Year 2 160 000 150 000 Year 3 170 000 150000 Year 4 180 000 150 000 Year 5 150 000 150 000 Depreciation peryear 90 0000 100 000 Additional information 1. Project A machineryis expected to be disposed of at the end of year 5 with a scrapvalue of 50 000 (not included in the figures above) 2. Project Bmachinery is not expected to have any scrap value. 3. The discountrate to be used by the company is 15%. QUESTION 1 • Calculate thePayback Period of Project A (answer expressed in years, months anddays). • Calculate the Accounting Rate of Return (on averageinvestment) of Project A (answer expressed to two decimal places).• Calculate the Benefit Cost Ratio of Project A (answer rounded offto three decimal places). • Calculate the Internai Rate of Returnof Project B (answer expressed to two decimal places).