Reference no: EM132552579

As a financial manager of Limited Enterprises, you are required to analyse two proposed capital investments, Projects 1 and 2. Each has a cost of R100 000, and the cost of capital for each project is 12%. Depreciation on each project is estimated at R25 000 per year. The projects' expected profit are as follows:

Year    Project 1           Project 2    

1         R40 000          R10 000

2           R5 000         R10 000

3            R5 000         R10 000

4         (R15 000)         R10 000

Required

Question 1: Calculate the payback period for each project (In years, months and days).

Question 2: Calculate the NPV for each project

Question 3: Which project or projects should be accepted if they are independent?

Question 4: Calculate the ARR for project 1.