A firm wishes to invest in new equipment for a new subsidiary it is starting up. The cost of the equipment is R2 000 000 and installation will cost R500 000. Additional working capital would require R150 000 in cash and R200 000 in inventory. The inventory would be financed by supplier (creditors). The subsidiary will do all sales on cash basis.

The period of investment is 5 years. The equipment will then be depreciated to a book value of zero and will be sold for R150 000. Straight line depreciation is applicable.

The projected sales and costs are as follows :

Year 1: Sales : R750 000 All costs (excluding interest expense) : 30% of sales

Inflation of 5% is applicable. The subsidiary is subject to a 28% tax rate and the WACC is 12%.

a) Calculate the Net Present Value of the project.

b) Calculate the Internal Rate of Return of the project.

C) What is the payback period of the project?

D) What is the Profitability Index of the project?

Note : Please, do not round off your calculations only round off your final answer to two decimal places