eda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in one of them. You are given the following projected data: Project A Project B Initial cost R300 000 R300 000 Scrap value R40 000 0
Use the information provided to answer the questions.
Use the information provided below to calculate the following. Where applicable, use the present
value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5.
5.1
5.1.1 Calculate the Payback Period of Project A (expressed in years, months and days).
INFORMATION
Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in
one of them. You are given the following projected data:
Project A Project B
Initial cost R300 000 R300 000
Scrap value R40 000 0
Net profit
Year 1 R20 000
Year 2 R30 000
Year 3 R50 000
Year 4 R60 000
Year 5 R10 000
Net cash flows
Year 1 R90 000
Year 2 R90 000
Year 3 R90 000
Year 4 R90 000
Year 5 R90 000
Additional information
The discount rate used by the company is 12%.
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