QUESTION $5$

$(20$ Marks$)$

Note: Where discount factors are required, use only the four decimals present value tables $($Appendix $1$ and $2)$ that appear after QUESTION $5.$

$5\mathrm{.}1$

REQUIRED

Use the information given below to calculate the following:

$5\mathrm{.}1\mathrm{.}1$ Payback Period $($expressed in years, months and days$)$

$(4$ marks$)$

$5\mathrm{.}1\mathrm{.}2$ Accounting Rate of Return on average investment $($expressed to two decimal places$)$

$(5$ marks$)$

$5\mathrm{.}1\mathrm{.}3$ Net Present Value. $($Your answer must include the calculations of the present values and NPV$.)$

$(4$ marks$)$

INFORMATION

Esquire Limited intends purchasing a new machine and the following details relate to this machine:

$\backslash$begin$\{$tabular$\}\{|$l$|$c$|$c$|\}$

$\backslash$hline Purchase price & R$1000000$ & $\backslash \backslash$

$\backslash$hline Expected useful life & $4$ years & $\backslash \backslash$

$\backslash$hline Scrap value $($not included in the figures below$)$ & R$200000$ & $\backslash \backslash$

$\backslash$hline Depreciation per year & R$200000$ & $\backslash \backslash$

$\backslash$hline Minimum required rate of retum & $\backslash (15\backslash \%\backslash )$ & $\backslash \backslash$

$\backslash$hline Expected net cash inflows and net profit: & Net cash flows & Net profit $\backslash \backslash$

$\backslash$hline Year $1$ & R$300000$ & R$100000\backslash \backslash$

$\backslash$hline Year $2$ & R$320000$ & R$120000\backslash \backslash$

$\backslash$hline Year $3$ & R$370000$ & R$170000\backslash \backslash$

$\backslash$hline Year $4$ & $\backslash (?\backslash )$ & R$80000\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$