Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / Payback accounting rate of return and NPV calculations plus a discussion of qualitative fa...

Payback accounting rate of return and NPV calculations plus a discussion of qualitative factors The following information relates to three possible capital expenditure projects Because of capital

Payback, accounting rate of return and NPV calculations plus a discussion of qualitative factors

The following information relates to three possible capital expenditure projects. Because of capital rationing only one project can be accepted.

 

 

Project

 

 

A

B

C

Initial Cost

£200000

£230000

£180000

Expected Life

5 years'

5 years

4 years

Scrap value expected

£10000

£15000

£8000

Expected Cash

(£)

(E)

(E)

Inflows

 

 

 

End Year 1

80000

100000

55000

2

70000

70000

65000

3

65000

50000

95000

4

60000

50000

100000

5

55000

50000

 

The company estimates its cost of capital is 18%. Calculate

(a) The pay back period for each project.

(b) The Accounting Rate of Return for each project.

(c) The Net present value of each project.

(d) Which project should be accepted — give reasons.

(e) Explain the factors management would need to consider: in addition to the financial factors before making a final decision on a project.

Jun 18 2020 View more View Less

Answer (Solved)

question Subscribe To Get Solution

Related Questions