QUESTION 3 NOTE: Where present value tables are required, use tables with 4 decimal places. REQUIRED Study the information given below and answer the following questions without the use of a financial calculator: 3.1 Calculate the Payback Period of Project B. (Answer must be expressed in years, months and days.) (3 marks) 3.2 Calculate the Average Rate of Return of Project B. (Express your answer to two decimal places.) (4 marks) 3.3 Calculate the Net Present Value of both projects. (Round off amounts to the nearest Rand.) (6 marks) 3.4 Refer to your answers in question 3.3 and state which project should be chosen. Give a reason for your answer. (1 mark) 3.5 Calculate the Internal Rate of Return of Project A, if the net cash inflow is R200 000 per year for 5 years. (Express your answer to two decimal places.) (6 marks) INFORMATION Two projects are being evaluated for possible investment by Rand Limited. Forecasts relating to the two projects are as follows:

	Project A	Project B
Initial investment	R750 000	R750 000
Expected useful life	5 years	5 years
Estimated salvage value	0	0
Average annual profit	R100 000	R144 000
Annual net cash flows:	R	R
Year 1	250 000	150 000
Year 2	250 000	170 000
Year 3	250 000	250 000
Year 4	250 000	400 000
Year 5	250 000	500 000

The cost of capital is 15%.