QUESTION 1 (25 Marks) As a financial manager of Dublin Enterprises, you are required to analyse two proposed capital investments, Projects ABC and Project XYZ. Each has a cost of R400 000, and the cost of capital for each project is 15%. Depreciation is calculated on the straight-line method. The projects expected profit are as follows:

PROJECT ABC PROJECT XYZ

YEAR 1 R80 000 R30 000

2 R10 000 R30 000

3 R10 000 R30 000

4 (R30 000) R30 000

Required 1.1 Calculate the payback period for each project (In years, months and days). (10) 1.2 Calculate the NPV for each project (10) 1.3 Which project or projects should be accepted if they are independent? (1) 1.4 Calculate the ARR for project XYZ