1. calculate Payback period of both machines (expressed in years, months and days.)

2. Accounting Rate of Return (on average investment) of Machine A (expressed to two decimal places)

Trump Limited intends purchasing a new machine and has the option of purchasing Machine A or Machine B. The following details apply

Machine A Machine B

Purchase price R800 000 R800 000

Expected useful life 4 years 4 years

Scrap value 0 0

Depreciation per year R200 000 R200 000

Minimum required rate of return 12% 12%

Expected net profit:

End of: Year 1 R20 000 R80 000

Year 2 R60 000 R80 000

Year 3 R140 000 R80 000

Year 4 R120 000 R80 000