QUESTION $5$

$(20$ Marks$)$

Note: Where discount factors are required, use only the present value tables provided in APPENDICES $1$ and $2$ that appear after the formula sheet.

$5\mathrm{.}1$

REQUIRED

Use the information provided below to calculate the following. Ignore taxes.

$5\mathrm{.}1\mathrm{.}1$

Payback Period $($in years, months and days$)$

$(4$ marks$)$

$5\mathrm{.}1\mathrm{.}2$

Accounting Rate of Return on initial investment $($expressed to two decimal places$)$

$(4$ marks$)$

INFORMATION

Wheelan Manufacturers intends investing in a machine. The following details relate to this machine:

Purchase price

R$700000$

Expected useful life

$4$ years

Scrap value

$0$

Minimum required rate of return

$15\%$

Depreciation per year

R$175000$

Expected profit:

$1$st year

R$120000$

$2$nd year

R$140000$

$3$rd year

R$160000$

$4$th year

R$180000$