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Carter Enterprises is considering an investment project with the following details:
- Initial investment of R700,000 and a residual value of R60,000.
Year | Cashflows | Discount factor |
Year 1 | R120,000 | 0.909 |
Year 2 | R140,000 | 0.826 |
Year 3 | R150,000 | 0.751 |
Year 4 | R100,000 | 0.683 |
Year 5 | R110,000 | 0.621 |
Cost of capital is 8%. Depreciation is R50,000 per year. Tax rate is 28%.
Required:
- Calculate each of the following:
- 1.3.1 Profitability Index (5)
- 1.3.2 Discounted Payback period (5)
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