Question: Liverpool pie shop has a new efficient pie making machine that it has acquired at a cost of R 7 5 0 0 0 ,

Liverpool pie shop has a new efficient pie making machine that it has acquired at a cost of R75000, with a lifespan of 5 years. The pie making machine will have a zero-scrapping value at the end of five years, and then be replaced with a more modern, health- conscious pie making machine. The expected cash flows from the sale of pies and the costs of manufacturing these pies (with all ingredients) is as follows for the next five years: Year 1 Year 2 Year 3 Year 4 Year 5 Expected cash inflows 42800572507350091770112240 Expected cash outflows 1620029150441006120080975 The tax rate is 50%, and the pie machine is depreciated on a straight-line basis over five years, with no residual value. The discount rate is 15% in evaluating capital projects. Required: 1. Calculate the Net Present Value of the business over the five-year period using a discount rate of 15%.(13 marks)2. What is the maximum amount Liverpool pie shop should have paid to the earned the 15% return envisaged?

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