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QUESTION $5$

$(20$ Marks$)$

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 account. Note: The IRR is not required.

$(8$ marks$)$

INFORMATION

MKEnterprises has R$200000$ whichit will invest if the investment earns atleast $16\%$ per annum, Three projects are being considered, each of which will cost $R200000$ to commence.

Project $x$ would earn R$220000$ at the end of the first year.

Project $Y$ would earn R$250000$ at the end of the second year.

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