Page 343 - F2 - MA Integrated Workbook STUDENT 2018-19
P. 343
Capital budgeting
Test your understanding 5
SWE is considering a project which requires an initial investment of $500,000.
The following profits have been forecast for the life of the project.
Year Profit
1 $90,000
2 $120,000
3 $150,000
4 $130,000
These profit figures have taken account of annual depreciation which has
been calculated as $15,000 per annum.
The company uses payment to appraise investments and requires a payback
within 3 years.
Calculate the payback for the investment in years and months and advise if
SWE would accept the project.
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