QUESTION 3 (20 Marks) Note: Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after the formula sheet. REQUIRED Use the information provided below to answer the following questions: 3.1 Calculate the Payback Period of Project A (expressed in years, months and days). (3 marks) 3.2 Calculate the Accounting Rate of Return on average investment of Project A (expressed to two decimal places). (4 marks) 3.3 Calculate the Net Present Value of each project. Show the calculations of the present values as well as the net present value. (6 marks) 3.4 Using the Net Present Value, which project should be chosen? Why? (1 mark) 3.5 Calculate the Internal Rate of Return of Project B. Your answer must include two net present value calculations and the steps to express the IRR to two decimal places. (6 marks) INFORMATION Two mutually exclusive projects are being considered by the management of Cena Enterprises, viz. Project A and Project B. Each project requires an initial investment of R2 500 000. Details of the net cash inflows and net profits are as follows: Net cash flows Net profits Year Project A Project B Project A Project B R R R R 1 510 000 750 000 30 000 250 000 2 530 000 750 000 50 000 250 000 3 780 000 750 000 300 000 250 000 4 1 350 000 750 000 870 000 250 000 5 600 000 750 000 120 000 250 000 Project A is expected to have a scrap value of R100 000 (not included in the figures above). No scrap value is expected for Project B. The firms cost of capital is 12%. Ignore taxes