an investment account at the bank each month.

QUESTION $3$

$(20$ Marks$)$

Note: Where applicable, use the present value tables that appear in the module guide.

REQUIRED

Study the information provided below and calculate the following:

$3\mathrm{.}1$ Payback Period of both projects $($expressed in years, months and days$).$

$(6$ marks$)$

$3\mathrm{.}2$ Accounting Rate of Return $($on average investment$)$ of Project B $($expressed to two decimal places$).$

$(4$ marks$)$

$3\mathrm{.}3$ Net Present Value of both projects. The answer must show the present values for each year followed by the calculation of the net present value.

$(6$ marks$)$

$3\mathrm{.}4$ Internal Rate of Return of Project B $($expressed to two decimal places$).$ The answer must include the calculation of two net present values $($using consecutive rates$/$percentages$)$ and interpolation.

$(4$ marks$)$

INFORMATION

You are required to do an analysis of two proposed capital investment projects. Details of initial investments, scrap values and net cash flows are presented below. The company uses a discount rate of $15\%$ when evaluating projects.

$\backslash$table$[[,$Project A$,$Project B$],[$Initial investment,R$600000,$R$600000],[$Scrap value $($not included in the figures below$),$R$20000,0],[$Net cash flows:,,$],[$Year $1,$R$310000,$R$220000],[$Year $2,$R$220000,$R$220000],[$Year $3,$R$190000,$R$220000],[$Year $4,$R$180000,$R$220000]]$

Note:

The profit per year for Project B was R$70000.$

TOTAL: $60$ MARKS