QUESTION 4 (20 Marks) REQUIRED Use the information provided to answer the following questions: 4.1 Calculate the payback period for project 2. (Answer must be expressed in years and months) 4.2 Calculate the accounting rate of return for project 3. (Answer expressed to 2 decimal places) 4.3 Calculate the net present value of each project. (Round off amounts to the nearest Rand) 4.4 Using the answers from question 4.3, which project should be chosen? Why? (5 marks) (5 marks) (9 marks) (1 marks) INFORMATION The following information relates to three possible capital expenditure projects. Because of capital rationing, only one project can be accepted. Project 1 R300 000 Project 2 R230 000 Project 3 R130 000 Initial cost 5 years 5 years 4 years Expected life Expected scrap value Expected net cash inflows: R20 000 R30 000 R16 000 R R End of year 1 200 000 110 000 2 R 160 000 140 000 130 000 120 000 110 000 65 000 95 000 3 140 000 100 000 100 000 100 000 100 000 5 The company estimates its cost of capital is 18%