2 Skylet Limited intends purchasing a new automobile service machine and has a choice between the following two machines: Machine E Machine F R440 000 Initial cost R400 000 Expected economic life 5 years 5 years Expected disposal/residual value R40 000 0 Expected net cash inflows R R End of: Year 1 136 000 128 000 Year 2 108 000 128 000 Year 3 128 000 128 000 Year 4 120 000 128 000 Year 5 52 000 128 000 Note: The company estimates that it's cost of capital is 14% Expected disposal/residual value is not included in the cash inflows given. 2.1 Calculate the payback period for Machine F. (answers must be expressed in years, months and days) (4 marks) 2.2 Calculate the accounting rate of return (on average investment) for Machine E. (answer rounded off to 2 decimal places) (5 marks) 2.3 State TWO (2) advantages of using the accounting rate of return in capital investment appraisal. (2 marks) 2.4 Calculate the net present value of each machine and indicate which machine should be chosen. (Round off amounts to nearest Rand) (8 marks) 2.5 Calculate the internal rate of return for machine F. (6 marks)