Question 5 Use the information provided to answer the questions. Use the information provided below to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. Calculate the Payback Period of Project A (expressed in years, months and days). 5.1 5.1.1 5.1.2 Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to two decimal places). (3 marks) (5 marks) INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in one of them. You are given the following projected data: Initial cost Scrap value Depreciation per year Net profit Year 1 Year 2 Year 3 Year 4 Year 5 Net cash flows Year 1 Year 2 Year 3 Year 4 Year 5 Additional information The discount rate used by the company is 12%. Project A R300 000 R40 000 R52 000 F:20 000 R30 000 R50 000 R60 000 R10 000 Project B R300 000 0 R60 000 R90 000 R90 000 R90 000 R90 000 R90 000 5.2 Use the information provided below to calculate the Internal Rate of Return (expressed to two (5 marks) decimal places) using interpolation. INFORMATION A machine with a purchase price of R1 200 000 is estimated to eliminate manual operations by R400 000 per year. The machine is expected to have a useful life of four years. APPENDIX 1: PRESENT VALUE OF R1 Number Periods 1 2 3 4 5 6 7 8 9 10 1% 0.9901 0.9804 0.9709 0.9615 2% 3% 4% 0.9515 0.9803 0.9612 0.9426 0.9246 0.9070 0.9420 5% 0.9235 0.9524 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 7% 0.9434 0.9346 0.9259 0.8535 0.7894 0.7307 0.9057 0.8626 0.8219 0.7835 0.7473 0.8900 0.8734 0.8573 0.8417 8% 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.8163 0.7938 0.7722 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 9% 0.9174 0.6768 0.6274 0.5820 0.9143 0.8368 0.7664 0.7026 0.6446 0.5919 0.5439 10% 0.9091 0.8264 0.7513 11% 12% 13% 14% 0.7130 0.6806 0.6499 0.6209 0.5935 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.9009 0.6587 0.8929 0.8850 08772 0.7312 0.7118 0.6931 0.6750 0.6575 0.5403 0.5019 0.4665 0.4339 15% 0.5835 0.5470 0.5132 0.4817 0.4523 0.4251 0.8696 0.5674 0.5428 0.5194 0.4972 16% 0.8116 0.7972 0.7831 0.7695 0.7561 0.7432 0.7305 0.7182 0.7062 0.5002 0.4604 0.4241 0.3909 0.3606 0.3329 0.3075 0.8621 0.8547 17% 0.6302 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.4104 0.3898 0.4761 0.6355 0.6133 0.5921 0.5718 0.5523 0.5337 0.5158 0.4987 0.4039 0.3762 0.3506 0.3269 0.3050 0.6407 0.6244 0.6086 0.5934 0.3996 0.3759 0.3538 0.3332 0.4561 0.2843 0.2630 18% 0.2848 0.8475 0.2434 19% 20% 0.3855 0.3522 0.3220 0.2946 0.2697 0.2472 0.2267 0,2080 0.8403 0.8333 0.8000 0.6944 06400 0.5787 0.5120 25% 0.4823 0.4096 0.4371 0.4190 0.4019 0.3277 0.3704 0.3521 0.3349 0.1911 0.1756 0.2660 0.2487 0.2326 0.3139 0.2959 0.2791 0.2097 0.2255 0.2090 0.1938 0.1615 0.2621 0.1678 0.1342 0.1074 11 12 13 14 15 16 17 18 19 20 0.8963 0.8043 0.7224 0.6496 0.5847 0.5268 0.8874 0.7885 0.7014 0.6246 0.8787 0.7730 0.6810 0.6006 0.5303 0.8700 0.7579 0.6611 0.5775 0.5051 0.5568 0.8444 07142 0.4970 0.8360 0.7002 0.5874 0.4936 0.4155 0.8195 0.6730 0.8613 0.7430 0.6419 0.5553 0.4810 0.4173 0.3624 0.3152 0.2745 0.4751 0.4289 0.3875 0.3505 0.8528 0.7284 0.6232 0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.4440 0.3971 0.4423 0.3878 0.3405 0.2992 0.2633 0.8277 0.6864 0.5703 0.4746 0.3957 0.3305 0.3555 0.3186 0.6050 0.5134 0.4363 0.3714 0.3166 0.2703 0,2311 0.4688 0.4150 0.3677 0.3262 0.2897 0.2575 0.2292 0.2042 0.1821 0.3503 0.2959 0.5537 0.4564 0.3769 0.3118 0.2584 0.2394 0.1978 0.2502 0.2120 0.1799 0.2765 0.2317 0.1945 0.1635 0.3173 0.2875 0.2607 0.2366 0.2149 0.1954 0.2858 0.2567 0.2145 0.1784 0.1486 0.2090 0.2307 0.2320 0.2046 0.1807 0.1597 0.1413 0.1377 0.1827 0.1599 0.1401 0.2176 0.1883 0.1631 0.1415 0.1229 0.1069 0.0930 0.0811 0.1696 0.1456 0.1252 0.1078 0.1528 0.1300 0.1108 0.1240 0.2076 0.1869 0.1685 0.15:20 0.1372 0.1240 0.1122 0.0687 0.1161 0.0981 0.0946 0.1625 0.1452 0.1299 0.1163 0.1042 0.0935 0.0550 0.1229 0.1079 0.1778 0.1619 0.1252 0.1110 0.0985 0.0876 0.0779 0.0440 0.0929 0.0802 0.0829 0.0703 0.0596 0.1037 0.0868 0.0728 0.0611 0.0514 0.1476 0.1346 0.0859 0.0949 0.0835 0.0736 0.0649 0.0352 0.0693 0.0808 0.0691 0.0592 0.0508 0.0708 0.0618 0.0541 0.0600 0.0520 0.0451 0.0225 0.0506 0.0431 0.0281 0.0437 0.0376 0.0180 0.0367 0.0313 0.0144 0.0433 0.0365 0.0308 0.0261 0.0115 25 30 40 50 60 0.7798 0.6095 0.4776 0.3751 0.2953 0.2330 0.1842 0.7419 0.5521 0.4120 0.3083 0.6717 0.4529 0.3066 0.2083 0.1420 0.0972 0.0668 0.6080 0.3715 0.2281 0.1407 0.2314 0.1741 0.1314 0.0994 0.0754 0.0872 0.5504 0.3048 0.1697 0.0951 0.0535 0.1460 0.1160 0.0923 0.0736 0.0303 0.0460 0.0318 0.0543 0.0339 0.0213 0.0134 0.0173 0.0099 0.0057 0.0573 0.0437 0.0221 0.0154 0.0033 0.0588 0.0471 0.0378 0.0304 0.0107 0.0075 0.0053 0.0085 0.0054 0.0035 0.0022 0.0014 0.0334 0.0256 0.0196 0.0151 0.0116 0.0090 0.0070 0.0054 0.0042 0.0012 0.0019 0.0011 0.0007 0.0004 0.0037 0.0245 0.0197 0.0009 0.0026 0.0019 0.0013 0.0010 0.0007 0.0001 0.0006 0.0004 0.0160 0.0129 0.0105 0.0038 0.0002 0.0001 0.0001 0.0003 0.0002 0.0001 * * . Number of Periods 1 2 3 4 5 1% APPENDIX 2: PRESENT VALUE OF A REGULAR ANNUITY OF R1 PER PERIOD FOR N PERIODS 1.9704 2% 1.9416 3% 2.9410 2.8839 0.9901 0.9804 0.9709 0.9615 0.9624 0.9434 4% 5% 3.9020 3.8077 3.7171 6% 1.9135 1.8861 1.8594 1.8334 2.8286 27751 2.7232 7% 3.6299 3.5460 3.4651 0.9346 1.8080 8% 0.9259 1.7833 2.6730 2.6243 25771 3.3872 3.3121 4.8534 4.7135 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927 9% 10% 11% 12% 1.7591 1.7355 1.7125 13% 0.9174 0.9091 0.9009 0.8929 0.8850 2.5313 24869 24437 2.4018 23612 14% 1.6901 1.6681 1.6467 3.2397 3.1699 3.1024 3.0373 2.9745 0.8772 2.3216 2.9137 3.8897 3.7908 3.6959 3.6048 3.5172 3.4331 15% 16% 17% 18% 0.8696 0.8621 19% 20% 0.8547 0.8475 0.8403 0.8333 1.6257 1.6052 1.5852 1.5656 1.5465 1.5278 2.2832 2.2459 2.2096 2.1743 2.1399 2.1065 3.3522 3.2743 2.8550 2.7982 2.7432 2.6901 2.6386 2.5887 3.1993 3.1272 3.0576 2.9906 6 7 8 9 10 1 12 13 14 15 5.7955 5.6014 5.4172 5.2421 5.0757 6.7282 6.4720 6.2303 6.0021 7.6517 7.3255 7.0197 10.3676 9.7868 9.2526 8.5660 8.1622 7.7861 7.4353 7.1078 12.1337 6.7327 11.2551 10.5753 9.9540 9.3851 11.3484 13.0037 12.1062 9.4713 8.9826 8.5302 8.1109 7.7217 7.3601 8.7605 11.2961 5.7864 10.5631 4.9173 4.7665 4.6229 6.4632 6.2098 5.5824 8.8633 6.8017 8.3064 7.8869 5.3893 5.9713 6.5152 5.2064 5.7466 6.2469 7.0236 6.7101 7.4987 7.1390 8.3838 7.9427 7.5361 9.8986 9.2950 8.7455 8.2442 4.4859 4.3553 4.2305 13.8651 12.8493 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 5.0330 4.8684 4.7122 4.5638 4.4226 4.2883 4.1604 4.0386 3.9224 3.8115 3.7057 3.6046 5.5348 5.3349 5.1461 4.9676 5.9952 5.7590 6.4177 6.1446 5.8892 6.8052 6.4951 6.2065 4.1114 7.1607 6.8137 6.4924 8,0607 3.9975 3.8887 3.7845 3.6847 3.5892 3.4976 3.4098 3.3255 5.5370 5.3282 5.1317 4.9464 7.7862 7.3667 6.9819 10.6350 9.9856 9.3936 8.8527 8.3577 7.9038 7.4869 7.1034 6.7499 6.4235 6.1218 4.7988 5.9377 5.6869 6.1944 5.9176 5.6502 5.4262 5.2161 5.0188 4.8332 4.6586 4.4941 4.3389 4.1925 4.6389 4.4873 4.3436 4.2072 4.0776 3.9644 3.8372 6.6282 6.3025 7.6061 7.1909 6.8109 6.4624 4.7716 4.6065 4.4506 4.3038 5.4527 5.2337 5.0286 4.8364 5.8424 6.0021 5.6603 5.4206 5.1971 4.9884 4.7932 4.6105 4.4392 5.5831 5.3423 4.1633 4.0310 5.7245 5.4675 6.1422 5.8474 5.5755 4.6560 4.4865 4.3271 5.1183 4.9095 4.7147 5.2293 5.0081 4.8023 5.3242 5.0916 4.8759 4.5327 4.6106 4.6755 16 17 18 19 20 25 30 40 50 60 14.7179 13.5777 12.5611 11.6523 10.8378 10.1059 15.5623 14.2919 13.1661 12.1657 11.2741 16.3983 14.9920 13.7535 12.6593 17.2260 15.6785 14.3238 13.1339 12.0853 22.0232 19.5235 11.6896 25.8077 22.3965 18.0456 16.3514 14.8775 13.5903 12.4622 11.4699 19.6004 17.2920 15.3725 10.4773 9.7632 9.1216 32.8347 27.3555 23.1148 19.7928 17.1591 9.4466 8.8514 8.3126 7.8237 7.3792 6.9740 6.6039 6.2651 5.9542 5.6685 5.4053 5.1624 4.9377 4.7296 10.8276 10.0591 11.1581 9.3719 8.5436 8.0216 7.5488 7.1196 6.7291 6.3729 6.0472 5.7487 8.7556 8.2014 17.4131 15.6221 14.0939 12.7834 11.6536 10.6748 9.8226 9.0770 8.4217 10.3356 9.6036 8.9501 8.3649 7.8393 7.3658 6.9380 6.5504 6.1982 10.5940 9.8181 9.1285 8.5136 7.9633 7.7016 7.2497 44.9650 34.7609 27.6756 22.6235 18.9293 16.1614 14.0392 13.7648 124090 11.2578 10.2737 9.4269 8.6938 15.0463 13.3317 11.9246 10.7574 9.7791 8.9511 39.1961 31.4236 25.7298 21.4822 18.2559 15.7619 13.8007 12.2335 10.9617 12.3766 11.0480 9.9672 7.4694 7.8431 8.0552 6.8399 6.4674 6.1280 5.8178 9.0736 8.3240 7.3300 6.8729 6.4641 9.9148 9.0417 8.3045 7.6752 7.1327 6.6605 7.0248 6.6231 6.2593 5.9288 5.6278 5.3527 5.1009 4.8696 5.8775 5.5845 5.3162 5.0700 4.8435 7.4967 7.0027 6.5660 6.1772 8.2438 7.6344 7.1050 6.6418 6.2335 5.4746 5.2223 4.9897 4.7746 5.5339 5.2732 5.0333 4.8122 6.0971 5.7662 5.4669 5.1951 4.9476 6.2463 5.8294 5.5168 5.2347 4.9789 5.8713 5.5482 5.2582 4.9966 5.8801 5.5541 5.2623 4.9995 7.6873 7.1401 6.6651 6.2402 5.8819 5.5553 5.2630 4.9999