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Theta Inc Details:Initial amount invested is R350,000 and expected residual value is R25,000.Cashflows and discount...

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Accounting

Theta Inc Details:

  • Initial amount invested is R350,000 and expected residual value is R25,000.
  • Cashflows and discount factors:

Year

Cashflows

Discount Factor

Year 1

R70,000

0.909

Year 2

R130,000

0.826

Year 3

R120,000

0.751

Year 4

R85,000

0.683

Year 5

R65,000

0.621

  • Cost of capital: 10%
  • Depreciation: R20,000 per year
  • Tax rate: 29%

Required:

  1. Calculate each of the following: 1.1 Accounting Rate of Return 1.2 Payback period 1.3 Net Present Value (NPV) 1.4 Internal Rate of Return (IRR)

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