The directors are contemplating diversification in 2024 by entering the passenger transport market. This could be achieved through the purchase of a fleet of midi buses that are expected to cost R9 500 000. An additional R500 000 will be spent on import duties. The cost of operating the buses each year is expected to be R4 100 000 and

Sep 8, 2023

The directors are contemplating diversification in 2024 by entering the passenger transport market. This could be achieved through the purchase of a fleet of midi buses that are expected to cost R9 500 000. An additional R500 000 will be spent on import duties. The cost of operating the buses each year is expected to be R4 100 000 and the annual revenues from transporting the passengers are estimated at R7 000 000. 

  1. Refer to the planned diversification for 2024 and calculate the following:
  2. 1 Payback Period (expressed in years, months and days)
  3. 2 Accounting Rate of Return on initial investment (expressed to two decimal places)
  4. 3 Net Present Value
  5. 4 Internal Rate of Return using interpolation (expressed to two decimal places).
    5 Internal Rate of Return using interpolation (expressed to two decimal places) if there were no import duties and no salvage value.

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The directors are contemplating diversification in 2024 by entering the passenger transport market. This could be achieved through the purchase of a fleet of midi buses that are expected to cost R9 500 000. An additional R500 000 will be spent on import duties. The cost of operating the buses each year is expected to be R4 100 000 and
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