For the following exercise complete the calculations below. Evaluate

For the following exercise complete the calculations below. Evaluate different capital investment appraisal techniques by completing the calculations shown below: Bongo Ltd. is considering the selection of one of two mutually exclusive projects. Both would involve purchasing machinery with an estimated useful life of 5 years. Project 1 would generate annual cash flows (receipts less payments) of 200 000; the machinery would cost 556 000 with a scrap value of 56 000. Project 2 would generate cash flows of 500 000 per annum; the machinery would cost 1 616 000 with a scrap value of 301 000. Bongo uses straight-line depreciation. Its cost of capital is 15% per annum. Assume that all cash flows arise on the anniversaries of the initial outlay that there are no price changes over the project lives and that accepting either project will have no impact on working capital requirements. Assess the choice using the following methods by completing the calculations shown below: ARR NPV IRR Payback period

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