Janakie
Nov 8, 2010, 09:57 AM
Baba Company is considering buying a cutting equipment that cost RM18,000. The equipment
will be used in its operation for the next four years and will be depreciated using straight line
method. The following data are given pertaining the investment proposal:
Working capital 5,000
Operations (per year for 4
years):
Cash receipts RM20,000
Cash expenditures 12,000
Disinvestment:
Salvage value of
equipment
RM2,000
Recovery of working
capital
5,000
Discount rate 10 percent
The discount factors are given below:
Period Present Value
Factor
1 0.909
2 0.826
3 0.751
4 0.683
Required:
Determine the following values:
a) Payback period
b) Accounting rate of return on average investment
c) Net present value
will be used in its operation for the next four years and will be depreciated using straight line
method. The following data are given pertaining the investment proposal:
Working capital 5,000
Operations (per year for 4
years):
Cash receipts RM20,000
Cash expenditures 12,000
Disinvestment:
Salvage value of
equipment
RM2,000
Recovery of working
capital
5,000
Discount rate 10 percent
The discount factors are given below:
Period Present Value
Factor
1 0.909
2 0.826
3 0.751
4 0.683
Required:
Determine the following values:
a) Payback period
b) Accounting rate of return on average investment
c) Net present value