Projects M and N, of equal risk, are alternatives for expanding Rosa Companys capacity. The...
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Accounting
Projects M and N, of equal risk, are alternatives for expanding Rosa Companyscapacity. The firms cost of capital is 13%. The cash flows for each project areshowninthefollowingtable:
Year
ProjectM
ProjectN
Initial outlay
R800000
R800000
1
R150000
R150000
2
R200 000
R350 000
3
R250 000
R300 000
4
R300 000
R150 000
5
R350 000
R50000
The management of Rosa Company has stated that they would like a paybackperiod of two years, if possible, due to the uncertainty caused by the Covid-19pandemiconthesetwoprojects.
REQUIRED:
Evaluate the two (2) projects Rosa Company is considering using all methods of capital budgetting eveluation payback method, discounted payback, NPV and IRR and recommend,with justification, which projectRosa Companyshould accept.
Suggestedformat:
ProjectM
ProjectN
CF0
CF1
CF2
CF3
CF4
CF5
I/YR
IRR/YR
NPV
Paybackperiod
Discounted Payback
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