Study the information below and answer the questions thatfollow:
Information
Zakiv Limited is considering investing in a project. The followinginformation/data is available
for the project:
Annual profits (loss): R | R |
Year 1 | (38 000) |
Year 2 | 40 000 |
Year 3 | (7 000) |
Year 4 | 25 000 |
Year 5 | 34 000 |
| |
Initial Cash Investment | 300 000 |
| |
Expected useful life 5 years | 5 years |
| |
Scrap Value | 20 000 |
The company estimates that its cost of capital is 10%.
Required:
3.1 Calculate the Accounting Rate of Return for the project.
3.2 Calculate the Net Present Value for the project.
