$5\mathrm{.}2$

REQUIRED

Study the information provided below and answer the following questions. Ignore taxes.

$5\mathrm{.}2\mathrm{.}1$

Compute the Net Present Value. Your answer must include the calculations of the present values as well as the net present values.

$(5$ marks$)$

$5\mathrm{.}2\mathrm{.}2$

Should the new machine be considered for acceptance? Why?

$(1$ mark$)$

$5\mathrm{.}2\mathrm{.}3$

Calculate the Internal Rate of Return $($expressed to two decimal places$)$ if the machines have no scrap$/$resale value. Your answer must include two net present value calculations $($using consecutive rates$/$percentages$)$ and interpolation.

$(6$ marks$)$

INFORMATION

Vendit Limited is looking at the possibility of investing in fifty vending machines. The machines would cost R$800000,$ and its cash operating expenses would total R$510000$ per year. The machines are expected to have a useful life of five years. At the end of five years, the machines would be sold for R$160000.$ On the benefit side, it is estimated that the machines would generate cash revenues of R$760000$ per year. The cost of capital is $15\%.$