$5\mathrm{.}3$

REQUIRED

Use the information given below to answer the following questions:

$5\mathrm{.}3\mathrm{.}1$ Calculate the Internal Rate of Return $($expressed to two decimal places$).$ Your answer must include two net present value calculations $($using consecutive cost of capital rates$)$ and interpolation.

$(6$ marks$)$

$5\mathrm{.}3\mathrm{.}2$ Based on the IRR should the company consider purchasing the machine? Why?

$(1$ mark$)$

INFORMATION

Venus Limited is investigating an opportunity to purchase a machine for R$640000.$ The machine is expected generate net cash flows of $R180000$ per annum for five years. The company's cost of capital is $16\%.$