User talk:Peleza1963

Hi All' Can anyone help with the following question in financial management :

/ Accounting rate of return (ARR)] RANDS Services Revenue		1 000 000 Less cost of parts		350 000 Contribution Margin		650 000 Less fixed expenses:		530 000 Advertising	     250 000 Rent	              70 000 Salaries	      110 000 Insurance	       6 000 Depreciation 	       80 000 Other Sundry expenses	14 000 Net income		        120 000 (Ignore income taxes & inflation) New equipment costing R750 000 would be purchased for the center. Since the equipment would be electronic in nature and therefore subject to rapid obsolescence, it would have no more than a nine-year useful life and only a R30 000 scrap value. The company requires a return of 20% on all new centers. Also, the company will not open a new center unless it has a payback of four (4) years or less. 1.1 Calculate the simple rate ot return of the center. Should the center be opened? (use the formula: Net income for the year/ amount invested) 1.2 Calculate the accounting rate of return. Should the center be opened? 1.3 Calculate the payback period of the new center. Is the center an acceptable investment? Explain. 1.4 the new CEO is uneasy about the results obtained in 1.1 and 1.2 and would like some further analysis done. Compute the net present value of the new center and explain to him, what this means.