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Able Ltd is considering a new project for which the following information is avaliable .
Intial cost – $ 300,000
Expected life – 5years
Estimated scrap value – $20,000
Additional revenue from the project is $120,000 per year.
Increamental costs of the project – $30,000 per year
cost Capital -10%
Find accounting rate of return of the project, Payback and NPV
I have tried over and over but i v failed to know intial total cost for the all project – 5year
But you have typed the initial cost – it is an outflow of $300,000.
Followed by inflows of 120,000 – 30,000 = 90,000 a year for 5 years, and then an inflow of 20,000 at the end of 5 years.
Have you watch our free lectures on investment appraisal?
(Our free lectures are a complete course for Paper F2 and cover everything needed to be able to pass the exam well 🙂 )
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