Question 5 Use the information provided below to answer the following questions. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after Question 5. 5.1 Calculate the Payback Period of Project A (expressed in years and months). 5.2 Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to two decimal places). ( 3 marks) (5 marks) 5.3 Calculate the Net Present Value of each project. (Round off amounts to the nearest Rand.) (6 marks) 5.4 Based on your answers from question 5.3, which project should be chosen? Explain why. (1 marks) 5.5 Calculate the Internal Rate of Return of Project A (expressed to two decimal places). (5 marks) INFORMATION Hampshire Limited has the option to invest in machinery in Project A and Project B but finance is only available to invest in one of them. The initial cost of each project is R600 000. You are given the following projected data: PROJECT A R Annual net profit (loss): 20 000 Year 1 26C Partly sunny Annual net profit (loss): R Year 1 20 000 Year 2 40 000 I Year 3 60 000 Year 4 80 000 Year 5 (10 000) PROJECT B Annual net cash inflows: R Year 1 160 000 Year 2 160 000 Year 3 160 000 Year 4 160 000 Year 160 000 26C Partly 1. A scrap value (not included in the figures above) of R40 000 is anticipated for Project A only. 2. Depreciation is calculated using the straight-line basis. 3. The discount rate used by the company is 15%. 1 APPENDIX 1: PRESENT VALUE OF R1 Number 196 2 2 39. 4. 58 5 Periods 10% 115 12 133 15- 16 189 193 20% 25- . 1 0.9901 0.9601 0.9709 0.9615 0.9524 0.9434 0.9846 09259 09150 0.9991 09009 0929 08250 05772 0859 0.8620 085/7 0.87s 0.8403 0.8333 0.8000 12 09603 0.9512 0.9426 09246 09070 08900 0.8734 0.8573 0.3417 0825 06116 0.7972 0.7831 0.7895 0.7561 0.7432 0.7305 07122 0703 0.6914 0.6460 3 0.9705 0.9423 09151 08890 0.8538 0.6355 08163 07933 0.7722 0.7513 0.7312 0118 06931 06750 0.6075 0.6407 0621 0.60 0.5934 05787 05122 4 0.5610 0.9238 03885 0.8518 08227 0.7921 0.7629 0.7350 6.7084 0.6530 06587 0.6355 0.6133 0.5921 05795 0.5523 2.5357 05155 0.1967 04623 04095 5 0.9515 0.9057 08825 0.8219 07835 0.7473 0.7130 0.6806 05499 06209 05935 (5671 05423 0519 0.4561 G4371 0.4190 0.2019 0.3277 5 09420 0.5880 03375 7803 07462 0.7050 0.6663 0.5302 05963 0.5515 15346 0.500 1803 0.1556 0.101 03590 0.3704 0.0521 03319 0252 097 070 08131 0.7599 0.7107 08651 116224 05835 05170 ASI 07517 04523 0.1251 0.29 0.3759 3538 33333 03139 0.2959 0.2781 02997 25 05535 7.94 07307 3676 0.6274 0 5820 05103 0.50:9 3:2555 0.1339 0.1039 0.3752 03506 0322 03050 02818 0.2600 0.2457 026 1078 766 09026 016 0.5019 05139 O ECO 04001 34 03309 0.30 DO 025 0.2013 0.630 02434 055 0200 1936 0132 BETE DE 905 0551 03053 03555 3572 03020 16 0.2697 0.2160 011 0175 01515 OLO IS 11 0. 0.2007 02140 0504 1619 OTS or 26C Partly 10 09053 ULU 0.8203 02190 0.1938 0 1342 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 03855 03522 0.3220 0.2946 0.2697 0.2472 02267 02080 0.1911 0.1756 0.1615 0.1074 11 0.8963 0.8913 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0 3505 03173 02875 0.2607 0.2366 0.2149 0.1954 0.1778 0.1619 0.1476 12 0.1326 0.0859 08874 0.7885 0.7014 0.6246 05568 0.4970 0.4440 0.3971 0.3555 03186 02858 0.2567 0.2307 0.2075 0.1869 0 1685 0.1520 0.1372 0.1240 0112 0.0667 13 0.8787 0.7730 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 02897 0 2575 0.2292 0.2012 0.1821 0.1625 0.1452 0 1299 01153 0.1042 0.0935 00550 10 0.8700 0.7579 0.6631 0.5775 0.5051 0.4423 0.3878 03405 0.2992 0.2633 02320 02046 0.1807 1597 0 1413 0.1252 0.1110 0.0985 0.0876 0.0779 0.04.40 15 0.8613 0.7430 0.5419 0.5553 0:4810 0.4173 0.3624 0.3152 02745 02394 0 2090 0.1827 0 1599 0.1401 01229 0079 00949 0.0835 0.0735 0.0549 0.0352 16 08528 0.7284 0.6232 0.5339 04581 0.3836 03387 02919 0.2519 02176 0 1883 0.1631 0 1415 01229 01069 0.0930 00811 00700 0.0618 09511 0.0281 08844 0.7142 05050 0.5134 34753 022714 0.3166 02703 0.2311 0 1978 9.1696 0.1456 01252 0.1078 09:29 0902 0.0690 0.0600 0.0520 G51 2022 17 18 19 08350 0.7002 0.5874 0.4936 0.4155 OSOS 0.2959 0.2502 02120 01799 31528 0.1300 0.1165 0.09459808 0.069 0.0592 Dess 00437 09375 00480 02277 05703 0.4746 03957 03305 0.2755 012312 0.1915 0.1525 0:1377 01161 0.0937 00679 DOMUS 90596 1050 00433 0.0367 00613 0.0144 03 0311 02581 0.2105 0.1784 D.186 31210 0.1037 0859 0739 0.0511 00514 00030 30365 0.0208 00115 8 100 00 0.0186 0 071 00301 WA 00197 OD 9 2015 CORS DOTS 00331 DOID 0151 00116 000 COTO 0.005: 00012 0.0012 015 DO 0001920010 0000 000 26C Partly sunny Veure 0.002 UCOZ UW012 40 0.6717 0.4529 0.3066 0.2083 0.1420 0.0972 0.0668 00460 0.0318 0.0221 0.0154 0.0107 0.0075 0.0063 0.0037 0.0126 00019 0.0013 0.0010 0.0007 0.0001 50 OFDBO 0.3715 0.2281 0 1407 0.0872 0.0543 0.0339 0.0213 0.0134 00055 0.0054 0.0035 0.0022 0.0014 0.0009 0.0006 O DOW 0.0003 0.0012 0.0001 60 0.5504 0.3049 0.1697 0.0951 0.0535 0.0303 0.0173 0.0099 0.0067 0.0053 00019 0.0011 0.0007 0.0004 0.0002 0.0001 0.0001 APPENDIX 2: PRESENT VALUE OF A REGULAR ANNUITY OF R1 PER PERIOD FOR N PERIODS 15 2% 33 Nerber o Pe ods 6 495 8% 9% 10% 11% 12% 139 149 15% 16% 179 18% 199 2099 | 1 09804 19549 0.952 09901 -- 0.9434 90.66 0.9259 0.9709 0.9174 09091 69009 0.8929 0.5650 0.8772 0.8521 0.8696 0.8547 0.8475 0.8103 6.8353 1 8991 1 8080 2 . 48334 1.7833 19416 1.6467 1.7591 1.9135 17025 16257 1.5656 19704 18861 1 6052 1 6901 17355 1.6681 1.5852 1.5278 1.5165 3 2 1743 28839 22832 22459 2.1399 2320 2.3285 22098 20065 2.4637 29410 2.7751 2.7232 26243 2.2018 3 25771 2.6730 2.5313 2361223216 27432 26901 23550 26385 27952 2 5552 2.9745 2.9137 3.2397 35460 3165 3.1024 3.1699 3.6299 30073 33872 3312 39420 3 80T7 3.7171 4 3.1272 3.1993 34331 33522 3.5172 3.2743 29906 36048 3.0575 39427 38959 3.7908 11002 42124 43295 4.4518 3.8897 45797 5 68534 47135 33887 37815 3.5892 34976 3.4095 3.6817 1114 33055 12305 4659 43553 5229 33975 49173 - 4.7655 54172 5.2421 5.0757 56014 5.7955 38115 370ST 404 42883 20386 22 1925 3.6045 45638 5.0330 $8581 52050 55824 53893 5723 54720 62305 60041 5.7851 40775 12072 4336 39544 4.6389 S1661 55319 5:1349 19076 47926 5.7166 59712 67227 6.1632 62098 70197 1255 76517 10310 1771 11633 43036 J0065 19464 5137 ALSO 53252 55370 59952 5.7590 62059 6:55 55680 7 TOTO 8 71551 925 8 4001 52161 50189 43383 Seb 54262 5663 5 16 51 610 77217 7601 26C Partly sunny 6517 73255 70197 6.7327 64632 6 2006 59713 5.7466 55918 5.3349 5.1461 49676 4.7988 46389 44873 43436 42072 4.0776 3.05.14 38372 9 8.5E60 81622 7.7861 74353 7 1078 6 8017 6.5152 62469 5.9952 57590 5.5370 5.3282 51317 1964 4.7716 46065 44506 41633 4.0310 10 94713 8.9826 8,5302 81109 77217 73601 70236 6.7101 54177 6.1616 5.8892 5.6502 5.4262 5.2161 50188 48332 4.6586 41941 4.3389 4.1925 11 103676 97868 9.2526 8.7605 8.3064 78869 74987 7.1390 68052 6.1951 6.2065 5.9077 5.6869 545227 5.2337 5.0286 4.8364 45550 44865 41271 12 112551 10.5753 9.9540 93851 8.8633 83838 79427 75361 71607 6.8137 54924 6.1914 59176 55503 5.42065 1971 4.SPRA 4.7932 16106 13 12/1337 13184 10.6350 9.9856 9.3936 88527 8 3577 79038 74560 71034 6.7999 6.4235 6.1218 58424 55831 5.3423 51183 4.9095 47147 4537 13 0037 12.1062 112961 10 5631 98986 92950 8.7455 8.2412 77662 7.3667 69819 6622 63025 6 0021 57215 54675 5.2293 5.0081 48023 4.6105 15 13.865 12.8492 119379 11.1184 10.3797 97122 9 1075 85595 80607 76061 71909 6.8109 6.4624 61122 5847 5.5755 5.3242 50916 18759 4.6755 16 14.7179 13.5777 12 5611 11 6523 108378 10.1059 91456 B8514 83126 782237 7.3792 69740 68039 62651 5.9512 5665 5.1053 5 1624 49377 17295 1 57 55592 14.2919 13.1661 12 1657 112741 10:4773 9.7632 91216 55436 80216 75458 71196 67291 63129 60472 57487 5.1746 5.2223 19897 1776 8 538 14.992 3.7535 12.6593 115696 10.8276 10.0591 93719 87566 8.2011 7.7016 22497 68399 60674 6200 5.8178 55339 52732 5.8333 48122 30 73655 5151 6 5518 & 78305 55845 0604 6925s 33700 53167 1033356 4835 11.1581 13 129 120993 1426 15 72250 597 7233734 6. ST 52520 35136 91285 1.2006 5.3 562 9818 70 10000 162514 5775 13.5903 1945 3105 72000 12 fo 5.007 CO 7431 90770 1165 127631 55 21 9 112 BUS 1176 0452 12 31 1 26C Partly sunny A) ENG 08:3 2021/12 19 172260 15.6765 14.3788 13.1339 120856 11.1581 10.3356 9.6036 8.9501 29 8.3649 18.0456 7 8393 16.3514 73658 14 8775 6.9380 13.5903 6.5504 12.4672 6.1982 5.8775 11.4699 5.5845 10:5940 5.3162 5.0700 9.8181 4.8435 9.1285 8.5136 7.9633 7.4694 7.0248 6.6231 6.2593 5.9288 5.6276 5.3627 5.1009 25 4.8896 22.022 19.5265 17,4131 15.6721 14.0939 12.7834 116536 10.6748 9.8226 9.0770 84217 30 78431 25 BOTT 73300 22.3965 6.8729 19.8004 6,4641 17 2520 6.0971 5.7662 15.3725 5.4669 13.7648 5.1961 12.4090 4.9470 11 2578 10.2737 94269 8.6938 40 8.0652 32.8347 7.4967 27.3556 7.0027 21148 6.5650 6.1772 19.7928 56294 17.1591 5.5.63 15.0463 5.2347 133317 4.9729 11.9216 10.7574 9.7791 "K 8.9511 8 2438 SO 7.6344 39.1961 7.1060 66418 31,4236 6.2335 25.7298 5.8713 214822 5.5482 182559 5.2582 15.7619 4.9956 13.8007 12.2335 10.9517 99148 9.0417 8.3045 7.6752 60 71327 44 9550 34.7609 6.6505 6.2463 27.6756 5.6801 22.6285 5.5541 18.9293 5.2623 4.9995 16.1612 14.0392 12 3766 11.0480 9.9572 9.0736 8.3240 7.6873 7.1401 66651 6.2402 5.8819 5.5555 5.2630 4.9999