Andrews Scrapery Service is investigating the purchase of a new machine for cleaning and unblocking Stormwater pipesin Kwazulu Natal. The machine would cost R137 320, including freight and installation. Andrews estimated the new machine would increase the companys cash inflows, net of expenses, by R40 000 per year.

The machine would have a five-year useful life and no salvage value.

Required:

3.1. What is the machines internal rate of return to the nearest whole percent?[5]

3.2. Using a discount rate of 14%, what is the machines net present value? Interpret your results.[5]

3.3 Plot the NPV of the machine for different interest rates on a graph. Show the IRR on the graph.