Sony Ltd is considering investing in a new gaming console project with the following forecasted...
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Accounting
Sony Ltd is considering investing in a new gaming console project with the following forecasted details: Initial amount invested is R1,800,000 and expected residual value is R130,000.
Year | Cashflows | Discount factor |
Year 1 | R450,000 | 0.909 |
Year 2 | R460,000 | 0.826 |
Year 3 | R470,000 | 0.751 |
Year 4 | R480,000 | 0.683 |
Year 5 | R490,000 | 0.621 |
Assuming that the cost of capital for the company is 9%. The cash flows are after tax and depreciation is charged at R130,000 per year. Tax rate is 27%.
Required:
- Calculate each of the following: 1.1.1. Accounting Rate of Return (5) 1.1.2. Net Present Value (NPV) (10)
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