$(20$ Marks$)$

QUESTION $5q,($ Oite

Note: Where discount factors are required, use only the present value tables $($Appendix $1$ and $2)$ that appear after QUESTION $5.$

$5\mathrm{.}1$

REQUIRED

From the information provided below which project would you recommend? Substantiate your answer by showing the relevant calculations that take the time value of money into

$(8$ marks$)$

account. Note: The IRR is not required.

INFORMATION

MK Enterprises has R$200000$ which it will invest if the investment earns at least $16\%$ per annum. Three projects are being considered, each of which will cost R$200000$ to commence.

Project $x$ would earn $2220000$ at the end of the first year.

Project $Y$ would earn $R250000$ at the end of the second year.

Project $Z$ would earn R$120000$ at the end of the first year and R$125000$ at the end of the second year.