QUESTION $3$

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

REQUIRED

Study the information provided below and calculate the following:

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

$3\mathrm{.}2$ Accounting Rate of Return $($on average investment$)$ of Project B $($expressed to two

decimal places$).$

$3\mathrm{.}3$ Net Present Value of both projects. The answer must show the present values for each

year followed by the calculation of the net present value.

$3\mathrm{.}4$ Internal Rate of Return of Project B $($expressed to two decimal places$).$ The answer must

include the calculation of two net present values $($using consecutive rates$/$percentages$)$

and interpolation.

INFORMATION

You are required to do an analysis of two proposed capital investment projects. Details of initial investments,

scrap values and net cash flows are presented below. The company uses a discount rate of $15\%$ when

evaluating projects.

Note:

The profit per year for Project B was $R70000.$