Medico Limited intends investing in a project during March 2021. The project is expected to cost...

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Accounting

Medico Limited intends investing in a project during March 2021.The project is expected to cost R2 500 000 with a five-year usefullife, and no residual value. The annual volume of production forthe project is estimated at 150 000 units, which can be sold forcash at R12 per unit. Depreciation is expected to be R500 000 peryear. Annual cash operating costs are as follows: Variable costsR225 000 Fixed costs R750 000 The cost of capital is 15%. REQUIREDUse the information provided above to calculate the following:
2.1 Net Present Value
2.2 Accounting Rate of Return on average investment (answerexpressed to two decimal places)
2.3 Internal Rate of Return, if the net cash flows are R720 000per year for five years (answer expressed to two decimal places).

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4.1 Ratings (784 Votes)

21 Annual volume 150000 units SP 12 Sales 1800000 Less Vcost 225000 Fixed cost 750000 CFAT 825000 PVAF 15 for 5 Years 335 PV of CFAT 2763750 Initial See Answer

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