ZYC LTD has a cost of capital of 15% and is considering a capital investment...
80.2K
Verified Solution
Link Copied!
Question
Finance
ZYC LTD has a cost of capital of 15% and is considering a capital investment project of 100,000, with no scrap value, where the estimated cash flows, depreciation and profits are as follows: Cash flows Depreciation Profits (after depreciation) Year 0 -100,000 - - Year 1 60,000 25,000 35,000 Year 2 80,000 25,000 55,000 Year 3 40,000 25,000 15,000 Year 4 30,000 25,000 5,000 Required a) Calculate the accounting rate of return (ARR) based on initial investment ? b) Calculate the payback period (PBP) for the capital investment project ? c) Calculate the net present value (NPV) of the capital investment project ? d) Advise ZYC as to whether they should invest in the project ? justify your advice by making specific reference to the ARR, PBP and NPV calculated
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
