SECTIONA Q2. Answer all parts [total 20 marks] (a) What factors distinguish 'capital expenditure' from other types of expenditure within manufacturing organisations? Support your answer with THREE examples of typical capital expenditure projects. (3 marks) (b) A company has budgeted for a capital investment of 150,000. Only one project can be chosen for investment and the company must decide between three different investment proposals. The following information is provided Project C Project A 150000 4 years Project B Capital expenditure 150000 150000 Expected life Scrap value 5 years 8000 3 years 15000 expected10000 Cash flow - yr 1 Cash flow -yr 2 Cash flow - yr 3 Cash flow - yr 4 Cash flow -yr 5 52000 52000 52000 48000 42000 42000 42000 42000 42000 62000 62000 62000 Notes 1. Capital expenditure for all three projects would be incurred immediately 2. Taxation is to be ignored 3. The company estimates its cost of capital to be 15% (Table QA2) You are required to calculate for each project; (i) (ii) (ili) the net present value the internal rate of return the payback period (12 marks) (c) State the relative merits of the methods of investment appraisal in b(i-ii). (3 marks) (d) Which project, on balance, you would recommend for acceptance? Give your reasons. (2 marks) Note: Present value of 1 table is given at the end of the paper