Question

In: Accounting

there are presently (2) projects available to shrewsberry limited,however the company only has cash available of...

there are presently (2) projects available to shrewsberry limited,however the company only has cash available of one of them.
                       Project R.            Project S
investment. 900000.            600000
Depreciation straight line    straight line
cost of capital 14%.                       14%
lifespan.        5 years.                    5 years     
residual         84000.                     nil    
net profit.         
year 1.              56000.                  7000
year 2                80000                 7000
year 3                102000.              7000
year 4.                130000               7000
year 5.                152000               7000
required:
1.1 calculate the accounting rate of return for project R.
1.2 Calculate the payback period for both projects.
1.3 calculate the net present value for both projects
1.4 which project should the company choose and why?

Solutions

Expert Solution

Answer is given below

Accounting rate of return has been given based initial investment as well as average investment

ekkarill92 answered 1 year ago
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