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

REQUIRED

Use the information provided below to calculate the following. Ignore taxes.

$5\mathrm{.}1$

Payback Period of Machine A $($expressed in years, months and days$).$

$(3$ Marks$)$

$5\mathrm{.}2$

Net Present Value of Machine A$.$ Show the calculations of the present values as well as the net present value.

$(4$ Marks$)$

$5\mathrm{.}3$

Accounting Rate of Return on average investment of Machine A $($expressed to two decimal places$).$

$(5$ Marks$)$

$5\mathrm{.}4$

Profitability Index of Machine B $($expressed to two decimal places$).$ Also show the calculations of the present values.

$(4$ Marks$)$

$5\mathrm{.}5$

Internal Rate of Return of Machine B $($expressed to two decimal places$).$ Your answer must include two net present value calculations $($using cost of capital rates of $16\%$ and $17\%)$ and the steps to calculate the IRR.

$(4$ Marks$)$

INFORMATION

Taurus Limited intends purchasing a new machine and has a choice between the following two machines:

Machine A

Machine B

Initial cost

R$800000$

R$800000$

Expected useful life

$5$ years

$5$ years

Scrap value $($not included in the figures below$)$

R$100000$

$0$

Annual depreciation

$140000$

$160000$

Cost of capital

$12\%$

$12\%$

Expected annual net cash flows:

R

R

Year $1$

$240000$

$250000$

Year $2$

$220000$

$250000$

Year $3$

$280000$

$250000$

Year $4$

$300000$

$250000$

Year $5$

$200000$

$250000$