QUESTION THREE

Ooto Ltd has a choice of two projects to invest in$,$ both of which cost R$17000.$ The following

details relate to these projects:

Calculate the following:

$3\mathrm{.}1$ Payback period for both projects

$3\mathrm{.}2$ Net Present Value for both projects

$3\mathrm{.}3$ Determine which project the company should choose.

$3\mathrm{.}4$ Discuss an advantage and a disadvantage of the payback periodQUESTION THREE $[20]$

Ooto Ltd has a choice of two projects to invest in$,$ both of which cost R$17000.$ The following

details relate to these projects:

Year Project A Project B

Discount

factor @$10\%$

$1$ R $10000$ R$100000\mathrm{.}909$

$2$ R $8000$ R $60000\mathrm{.}826$

$3$ R $6000$ R $160000\mathrm{.}751$

Calculate the following:

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

$3\mathrm{.}2$ Net Present Value for both projects $(10)$

$3\mathrm{.}3$ Determine which project the company should choose. $(2)$

$3\mathrm{.}4$ Discuss an advantage and a disadvantage of the payback period $(2)$