Sunshine Corporation is reviewing an investment proposal. The initial cost of the investment is R52 500. The estimated cash flows and net profit for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. Year Net cash flows Net profit 1 R20 000 R2 500 2 R17 500 R3 500 3 R15 000 R4 500 4 R12 500 R5 500 5 R10 000 R6 500 The cost of capital is 12%. Required: Calculate the following: 1. Payback Period 2. Net Present value 3. Accounting rate of return

Sunshine Corporation is reviewing an investment proposal. The initial cost of the investment is R52 500. The estimated cash flows and net profit for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. Year Net cash flows Net profit 1 R20 000 R2 500 2 R17 500 R3 500 3 R15 000 R4 500 4 R12 500 R5 500 5 R10 000 R6 500 The cost of capital is 12%. Required: Calculate the following: 1. Payback Period 2. Net Present value 3. Accounting rate of return

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 11P

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Sunshine Corporation is reviewing an investment proposal. The initial cost of the investment is R52 500. The estimated cash flows and net profit for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. year Net cash flows Net profit 1 20000 2500 2 17500 3500 3 15000 4500 4 12500 5500 5 10000 6500 The cost of capital is 12%. Required:Calculate the following:1. Payback Period 2. Net Present value 3. Accounting rate of return
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