QUESTION ONE [25] Whema Ltd is interested in expanding its operations into Durban, South Africa and are looking to invest in offices there. The following information has been extracted from the reports relating to the project: Investment R1 500 000 Average annual profit R450 000 Life span 5 years Minimum required rate of return 15% Net Cash flows: 1St year R550 000 2nd year R600 000 3rd year R680 000 4th year R700 000 5th year R780 000 Required: 1.1 Calculate the accounting rate of return. (Express the answer to two decimal places). (5) 1.2 Calculate the payback period (Answer in years, months and days). (5) 1.3 Calculate the net present value (Round off amounts to the nearest Rand). (8) 1,4 Would the project be acceptable at a cost of capital of 17%? Motivate your answer with an appropriate calculation. (7) QUESTION TWO [25] 2.1. At a Finance Committee meeting a director remarks "Selling preference shares with a return of 9 % or debentures with a return of 9 % is really one and the same thing". The company has the option of raising R400 000 through either: a. The sale of 40 000 preference shares at R10 per share or b. 4 000 debentures of R100 each. NB: the tax rate is 30% Evaluate the director's assertion with the aid of appropriate calculations. (7)