QUESTION $3$

$(20$ Marks$)$

Note: Where applicable, use the present value tables that appear in the nodule guide.

REQUIRED

Stuct the information provided below and calculate the following:

$3\mathrm{.}1$ Payback Period of bath projects $($expressed in years, nonths and days$).$

$(6$mirs$)$

$3\mathrm{.}2$ Accounting Rate of Retum $($on average invesiment$)$ of Project B $($oxpressed to tho decinal places$).$

$(4$ marks$)$

$3\mathrm{.}3$ Nel Present Value of boh projects. The answer must show the present values for each year followed by the caloulaton of the nel pesent value.

$(6$ marks$)$

$3\mathrm{.}4$ Internal Rate of Retum of Projed $8($oxpressed to two decinal placos$).$ The answer must include the calculation of two net present valus $($ising consecuive rales$($percentages$)$ and interpolation.

$(4$ marks$)$

INFORMATION

You are required to do an analysis of two proposed capit $/$hvesiment propects. Detals of initial investments, scrap values and net cash flows are presented belor. The company ises a discount rale of $15\%$ when evaluating projects.

$\backslash$table$[[,$Project A$,$Project B$],[$Initial investment,$R600000,$R$600000],[$Scrap value $($not induded in the figures below$),$R$20000,0],[$Net cash flows:$],[$Year $1,$R$310000,$R$220000],[$Year $2,R220000,$R$220000],[$Year $3,$R$190000,$R$220000],[$Year $4,$R$180000,$R$220000]]$

Note:

The profit per year for Project B was R$70000.$

TOTAL: $60$ MARKS