QUESTION $3$

$(20$ Marks$)$

Leo $($Pty$)$ Ltd is considering two possible projects, D & E$.$ The projects are mutually exclusive, which means only one of them can be chosen. The following net profits to the projects:

$\backslash$table$[[$Year $0,$Project A$,$Project B$],[$R $25000,$R $25000],[$Year $1,$R $13000,$R $8000],[$Year $2,$R $5000,$R $8000],[$Year $3,$R $3000,$R $4000],[$Year $4,$R $2000,$R $10000],[$Year $5,$R $1000,$R $10000]]$

The cost of Capital is $30\%.$

Required:

$3\mathrm{.}1$ You are required calculate the accounting rate of return $($ARR$)$ for both project $D$ and $E.$

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