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13 Apr 2018
Paradigm Ltd is a company that manufactures glass bottles for the beverage industry in South Africa. Paradigm has recently raised $500,000 from the right issues. The directors of Paradigm is considering three projects (A, B and C) each of which consists of purchasing new equipment for the manufacturing of theses glass bottles. The equipment in each project will have equal to life of the project with no scrap value at the end.
Assume that the following information is available on the three projects
Net Cash flows ($'000) over the years
Project 0 1 2 3 4 5 6 7 A -500 112 100 115 145 100 140 165 B -500
100 115 140 140 135 C -500
150 140 125 125
Required:
1. Calculate the payback period for each project
2. Calculate the accounting rate of return for each project
Round calculations to two decimal places
Paradigm Ltd is a company that manufactures glass bottles for the beverage industry in South Africa. Paradigm has recently raised $500,000 from the right issues. The directors of Paradigm is considering three projects (A, B and C) each of which consists of purchasing new equipment for the manufacturing of theses glass bottles. The equipment in each project will have equal to life of the project with no scrap value at the end.
Assume that the following information is available on the three projects
Net Cash flows ($'000) over the years
| Project | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | |
| A | -500 | 112 | 100 | 115 | 145 | 100 | 140 | 165 | |
| B |
| 100 | 115 | 140 | 140 | 135 | |||
| C |
| 150 | 140 | 125 | 125 |
Required:
1. Calculate the payback period for each project
2. Calculate the accounting rate of return for each project
Round calculations to two decimal places
Trinidad TremblayLv2
14 Apr 2018
