1.2 Aqua Limited is considering the purchase of a machine with the following details:

The machine will cost R1 000 000 plus installation costs of R200 000 and it is expected to have a useful life of five years.

The machine is expected to generate net cash inflows of R300 000 per year.

Note: The company desires a minimum required rate of return of 12%.

Required:

1.2.1 Calculate the Net Present Value, if the machine is expected to have a salvage value of R50 000. (8)

1.2.2 Calculate the Internal Rate of Return if the machine had no salvage value. (6)