Calculate the internal rate of return of project amg

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Reference no: EM133056581

QUESTION - Calculate the payback period of each project and recommend the project that should be selected based on the payback period.

Consider two projects whose cash inflows are not even. Assume that the project costs R205 000. The net cash inflows for each year is as follows:

Year

Project M

Project N

1

R30,000,00

R75,000,00

2

R35,000,00

R95,000,00

3

R65,000,00

R60,000,00

4

R55,000,00

R26,000,00

5

R75,000,00

R95,000,00

Jimny Limited has a choice of investing in one of two projects. The following details relate to these:

 

Project BWM

Project AMG

Investment required

R70,000

R70,000

Expected Economic lifetime

4 years

4 years

Minimum required return of return

12%

11%

Net annual cash inflows

 

 

1st year

R15,000,00

R23,000,00

2nd year

R30,000,00

R23,000,00

3rd year

R28,000,00

R23,000,00

4th year

R18,000,00

R23,000,00

1. Use the net present value method to determine which project Jimny Limited should choose.

2. Calculate the internal rate of return of Project AMG.

3. Calculate the Accounting Rate of Return for Project AMG.

Reference no: EM133056581

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