Note: Where discount factors are required use only the present value tables provided in APPENDICES $1$ and $2$ that appear after the formula sheet.

$5\mathrm{.}1$

REQUIRED

Study the information provided below and calculate the following:

$5\mathrm{.}1\mathrm{.}1$ Payback Period $($expressed in years, months and days$).$

$(3$ marks$)$

$5\mathrm{.}1\mathrm{.}2$ Internal Rate of Return $($expressed to two decimal places$).$ Your answer must include two net present value calculations $($using consecutive rates$/$percentages$)$ and interpolation.

$(5$ marks$)$

$5\mathrm{.}1\mathrm{.}3$ Net Present Value if the equipment has a salvage value of $R80000.($Show the calculations of the present values as well as the net present value.$)$

$(4$ marks$)$

INFORMATION

Market research conducted by Kauai Ltd revealed great potential for a new energy drink. To produce the product would require R$1100000$ in new equipment. The equipment is expected to have a useful five years. Revenues from sale of the energy drink are estimated at R$800000$ per year and cash operating expenses are estimated at $R480000$ per year. The cost of capital is $15\%.$

$5\mathrm{.}2$

REQUIRED

Use the Gordon Growth Model to estimate the cost of the ordinary shares $($expressed as a percentage to two decimal places$)$ from the information provided below.

$(4$ marks$)$

INFORMATION

The market value of a Fitch Limited ordinary share is R$60.$ The dividend at the end of the previous year was $R9$ and the expected growth rate in dividends is $10\%$ p$.$a$.$

$5\mathrm{.}3$

REQUIRED

Use the information provided below to calculate the weighted average cost of capital $($expressed as a percentage to two decimal places$).$

eriodPresent value of Rl: PVEA $($k$,$n$)101670$APPENDIX $12\%|0620$Present value of a regular annuity of Rl per period for n periods : PVEA $($k$,$n$)$APPENDIX $291214$N$23216223223421401|611/1219\%20\%533326$O$499$