QUESTION THREE $(20$ MARKS$)$

Etion Limited plans to acquire plant and machinery to increase production capacity. It is considering the following two options:

$\backslash$table$[[,$Project Echo,Project November$],[$Initial investment,R$1200000,$R$900000],[$Useful life,$5$ years,$4$ years$],[,,],[$Annual cash inflows:,,R$310000],[$Year $1,$R$260000,$R$310000],[$Year $2,$R$280000,$R$310000],[$Year $3,$R$320000,$R$310000],[$Year $4,$R$360000,-],[$Year $5,$R$400000,],[,,],[$Minimum required rate of return,,$]]$

Calculate the following:

$3\mathrm{.}1$ Payback period for both projects $(6$ marks$)$

$($answer must be reflected in years, months, and days$)$

$3\mathrm{.}2$ Net present value for both projects $(6$ marks$)$

$($use discount factors as found in table $1$ and table $2$ of your module guide.

$3\mathrm{.}3$ Accounting rate of return on average investment for Project November $($answer rounded to $2$ decimal points$)(3$ marks$)$

$3\mathrm{.}4$ Internal rate of return for project November $(3$ marks$)$

$($answer rounded to $2$ decimal places$)$

$($use interpolation method as demonstrated in your module guide$)$

$3\mathrm{.}5$ Based on the net present value calculated, which project should be selected if these were mutually exclusive projec $(2$ marks$)$