QUESTION 5 (20 MARKS) Use the information given below to answer the following questions. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5 (bottom of the question paper). 5.1 Calculate the Payback Period of Machine A (expressed in years, months and days). (3 marks) 5.2 Calculate the Accounting Rate of Return (on average investment) of Machine A (expressed to two decimal places). (4 marks) 5.3 Calculate the Net Present Value of Machine A. (3 marks) 5.4 Calculate the Benefit Cost Ratio of Machine B (expressed to two decimal places). (4 marks) 5.5 Based on your answer in question 5.4, should Machine B be favourably considered for acceptance? Motivate your answer. (1 marks) 5.6 Calculate the Internal Rate of Return of Machine B (expressed to two decimal places), using interpolation. (5 marks) INFORMATION Leo Limited intends purchasing a new machine and has a choice between two machines viz. Machine A and Machine B. The following forecasts were made pertaining to these two machines:

\begin{tabular}{|l|c|c|} \hline & Machine A & Machine B \\ \hline Initial cost & R400 000 & R400 000 \\ \hline Expected useful life & 5 years & 5 years \\ \hline Scrap value & R50 000 & 0 \\ \hline Annual depreciation & 70000 & 80000 \\ \hline Required rate of return & 12% & 12% \\ \hline Expected annual net profit: & R & R \\ \hline Year 1 & 40000 & 50000 \\ \hline Year 2 & 30000 & 50000 \\ \hline Year 3 & 60000 & 50000 \\ \hline Year 4 & 70000 & 50000 \\ \hline Year 5 & 20000 & 50000 \\ \hline \end{tabular}