Microsoft Ltd is considering investing in a new cloud infrastructure project with the following forecasted...
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Accounting
Microsoft Ltd is considering investing in a new cloud infrastructure project with the following forecasted details: Initial amount invested is R800,000 and expected residual value is R70,000.
Year | Cashflows | Discount factor |
Year 1 | R200,000 | 0.909 |
Year 2 | R210,000 | 0.826 |
Year 3 | R220,000 | 0.751 |
Year 4 | R230,000 | 0.683 |
Year 5 | R240,000 | 0.621 |
Assuming that the cost of capital for the company is 11%. The cash flows are after tax and depreciation is charged at R80,000 per year. Tax rate is 26%.
Required:
Calculate each of the following: 1.1.1. Internal Rate of Return (IRR) (10) 1.1.2. Payback period (5)
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