[25] QUESTION THREE The following project is being considered by the management of Jupiter Industries: Cost of project R320 000 Expected economic life 5 years Depreciation method Straight-line Cost of capital 14% Details of the after tax net profit and cash flows are as follows: Year Net profit Cash flows Rand Rand 1 2 000 66 000 70 000 2 6 000 3 40 000 4 116 000 104 000 180 000 80 000 5 16 000 Required: 3.1 Calculate the returns the project would earn, using the following investment appraisal techniques: 3.1.1 Accounting rate of return (two decimal places) (5) 3.1.2 Payback period (years, months and days). (6) 3.2 If the current cut off period is 4 years, will the payback period be accepted? Why? (3) REGENT BUSINESS SCHOOL (RBS) - JANUARY 2022 22 ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT- ACADEMIC AND ASSESSMENT CALENDAR DISTANCE 3.3 Calculate the project's Net present value (round off amounts to the nearest Rand) On the basis of the net present value will the project be accepted? Why? (8) (3) 3.5