Appendix 1: Present value of R1

Appendix 2: Present value of a Regular Annuity of R1 per period for N periods

Please use answer table below

Use the information provided to answer the questions. Use the information provided below to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 5.1.1 Calculate the Payback Period of Project A (expressed in years, months and days). 5.1 5.1.2 5.1.3 5.1.4 Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to two decimal places). Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). Use your answers from question 5.1.3 to recommend the project that should be chosen. Motivate your choice. I (3 marks) (5 marks) (6 marks) (1 marks) Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in one of them. You are given the following projected data: Initial cost Scrap value Depreciation per year Net profit Year 1 Year 2 Year 3 Year 4 Year 5 Net cash flows Year 1 Year 2 Year 3 Year 4 Year 5 Additional information The discount rate used by the company is 12%. Project A R300 000 R40 000 R52 000 R20 000 R30 000 R50 000 R60 000 R10 000 Project B R300 000 R60 000 R90 000 R90 000 R90 000 R90 000 R90 000 0 Number d Periods 1 2 3 4 5 6 7 8 9 10 11 12 13 1% 2% 3% 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9803 0.9612 0.9426 0.9246 0.9070 4% 0.9327 5% 0.9235 6% 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.9053 0.8203 0.7441 0.8900 0.8734 0.8573 7% 0.8535 0.7894 0.7307 0.6768 0.6274 0.8874 0.7885 0.7014 0.9706 0.9423 09151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 0.9346 0.9259 8% 0.6246 0.5568 0.4970 9% 0.9174 0.8963 0.8043 7224 0.6496 0.5847 0.5268 0.4751 10% 11% 0.8417 0.8264 0.9091 0.9009 0.8929 0.6663 0.6302 0.5963 0.5645 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 05132 0.4817 0.9143 0.8368 0.7664 0.7026 06446 0.5919 0.5439 0.5002 0.4604 0.4241 08787 0.7730 0.6810 0.6006 0.5303 04688 04150 0.7130 0.6806 0.6499 0.6209 0.5935 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.5820 0.5403 0.5019 0.4665 0.4289 0.7350 0.7084 0.6830 0.6587 0.6355 0.3855 0.7312 0.7118 12% 0.8116 0.7972 0.7831 0.5346 0.3677 0.3262 02897 13% 14% 0.5674 0.8850 0.8772 0.8696 SINOTEC 0.5428 0.5194 0.6133 0.5921 0.5718 0.5523 0.5337 0.5066 0.4803 0.4566 0.4339 0.4039 0.3762 0.4523 0.4251 0.3996 0.6931 0.6750 0.6575 0.6407 0.6244 0.6086 0.5934 0.5787 0.5120 0.3522 0.3220 0.2946 0.7695 0.7561 0.7432 0.7305 0.7182 0.7062 0.6944 0.6400 0.3909 0.3606 0.3329 0.3075 15% 16% 17% 0.3506 0.4972 0.4761 0.8621 0.8547 0.8475 0.8403 0.8333 0.8000 0.3875 0.3505 0.3173 0.2875 0.2607 0.2366 02149 0.4440 0.3971 0.3555 0.3186 0.2858 0.2567 0.2307 02076 0.1869 0.3759 0.3538 0.3332 0.3269 0.3050 0.2848 0.2843 0.2630 0.4561 18% 19% 0.4323 0.4104 0.3898 0.3704 0.3521 0.3349 0.2621 20% 0.2434 0.1685 0.5158 0.4987 0.4823 0.4096 0.4371 04190 0.4019 0.3277 0.3139 0.2959 0.2791 0.2255 0.2090 0.1938 02097 0.2660 0.2487 0.2326 01678 0.2697 0.2472 0.2267 0.2080 0.1911 0.1756 0.1615 0.1074 25% 0.1342 0.1954 0.1778 0.1619 0.1476 0.1346 0.0859 0.1520 0.1372 0.1240 0.1122 0.0687 02575 0.2292 0.2042 0.1821 0.1625 0.1452 0.1299 0.1163 0.1042 0.0935 0.0550 13 14 15 16 17 18 19 20 25 30 40 50 0.8787 0.7730 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.8613 0.7430 0.6419 0.5553 0.4810 0.4173 0.8700 0.7579 0.6611 0.5775 0.5051 0.4423 0.3878 0.3405 0.2992 0.2633 0.2320 0.2046 0.1807 0.1597 0.1413 0.1252 0.8528 0.7284 0.6232 0.5339 0.8444 0.7142 0.6050 0.5134 0.8360 0.7002 0.5874 0.4936 0.4155 0.8277 0.6864 0.5703 0.4746 0.3957 0.7798 0.6717 0.8195 0.6730 0.5537 0.4564 0.3769 0.3118 0.6095 0.4581 0.3936 0.5504 0.4776 0.3751 0.3048 0.3624 0.3152 0.3387 0.2919 0.3503 0.2959 0.2502 0.7419 0.5521 0.4120 0.3083 0.2314 0.1741 0.1314 0.0994 0.3262 0.2897 0.2575 0.2292 0.2042 0.2745 0.3305 0.2765 0.2317 0.1945 0.4529 0.3066 0.2083 0.1420 0.0972 0.0668 0.0460 0.2519 0.2584 0.2145 0.1784 0.2953 0.2330 0.1842 0.1460 0.1160 APPENDIX 2 PRESENT YOU 0.4363 0.3714 0.3166 02703 02311 0.1978 0.1696 0.1456 0.1252 0.1078 0.0929 0.0802 0.0693 0.0600 0.0520 0.0451 0.0225 0.2120 0.1799 0.1528 0.6080 0.3715 0.2281 0.1407 0.0872 0.0543 0.0339 0.0213 0.0134 0.0754 0.2394 0.2090 0.1827 0.1599 0.1401 0.1229 0.1079 02176 0.1697 0.0951 0.0535 0.0303 0.0173 0.0099 0.0057 0.1883 0.1631 0.1635 0.1377 0.1486 0.1240 0.0318 0.0221 0.0085 0.0923 0.0736 0.0588 0.0573 0.0437 0.0334 0.1300 0.1108 0.0054 0.1161 0.0981 0.0033 0.0019 0.1037 0.0868 0.1415 01229 0.1069 0.0930 0.1821 0.1625 0.1452 0.1299 0.1163 0.1042 0.0935 0.0550 0.0035 0.0011 0.0022 0.0728 0.0471 0.0378 0.0154 0.0107 0.0075 0.0053 0.0037 0.0946 0.0808 0.0691 0.0592 0.0611 0.0514 0.1110 0.0829 0.0703 0.0596 0.0506 0.0431 0.0367 0.0313 0.0144 0.0014 0.0009 0.0949 0.0835 0.0736 0.0649 0.0352 0.0304 0.0245 0.0197 0.0256 0.0196 0.0151 0.0116 0.0090 0.0007 0.0004 0.0002 0.0811 0.0708 0.0618 0.0026 0.0001 0.0985 0.0876 0.0779 0.0440 0.0433 0.0541 0.0281 0.0508 0.0437 0.0376 0.0180 0.0001 0.0365 0.0308 0.0261 0.0115 0.0160 0.0129 0.0105 0.0038 0.0070 0.0019 0.0013 0.0010 0.0054 0.0042 0.0012 0.0006 0.0004 0.0003 0.0002 0.0001 0.0007 0.0001 Number of Periods 1 2 3 4 5 6 7 8 9 10 11 12 13 1% 2% 0.9901 0.9804 0.9709 0.9615 1.9704 1.9416 1.9135 3% 29410 2.8839 2.8286 2.7751 6.7282 3.9020 3.8077 3.7171 3.6299 4% 5.7955 5.6014 5.4172 52421 7.6517 7.3255 7.0197 112551 1.8861 1.8594 9.4713 8.9826 8.5302 10.3676 9.7868 5% 4.8534 4.7135 4.5797 4.4518 4.3295 4.2124 0.9524 0.9434 6.4720 6.2303 6.0021 5.7864 2.7232 3.5460 9.2526 8.7605 10.5753 9.9540 9.3851 6% 1.8334 2.6730 8.5660 8.1622 7.7861 7.4353 7.1078 6.8017 3.4651 8.8633 7% 1.8080 1.7833 5.0757 4.9173 4.7665 2.6243 2.5771 3.3872 8% 4.1002 09346 0.9259 0.9174 0.9091 0.9009 0.8929 8.1109 7.7217 7.3601 7.0236 6.7327 6.4632 6.2098 5.9713 57466 3.3121 5.5824 5.3893 5.2064 4.6229 6.5152 62469 9% 3.9927 3.8897 3.7908 8.3838 7.9427 7.5361 25313 12.1337 11.3484 10.6350 9.9856 9.3936 8.8527 8.3577 7.9038 10% 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 1.6257 3.2397 31699 3.1024 3.0373 44859 4.3553 5.5348 6.7101 64177 5.9952 2.4869 24437 2.4018 11% 8.3064 7.8869 7.4987 7.1390 6.8052 6.4951 7.4869 12% 3.6959 316048 7.1607 6.8137 5.0330 4.8684 4.7122 4.5638 4.4226 5.3349 5.1461 4.9676 13% 14% 15% 0.8850 0.8772 0.8696 0.8621 6.4924 42305 41114 3.9975 2.9745 6.1944 3.5172 3.4331 5.7590 5.5370 5.3282 5.1317 49464 2.3612 2.3216 2.2832 2.2459 2.2096 2.1743 2.1399 2.1065 3.8887 6.1446 5.8892 5.6502 5.4262 52161 16% 17% 2.9137 2.8550 2.7982 2.7432 2.6901 2.6386 2.5887 18% 0.8547 0.8475 6.2065 5.9377 5.6869 5.4527 5.2337 19% 20% 1.6052 1.5852 1.5656 1.5465 1.5278 3.3522 3.2743 3.1993 3.1272 3.0576 2.9906 4.2883 4.1604 4.0386 3.9224 3.8115 3.7057 3.6046 5.9176 5.6603 5.4206 0.8403 0.8333 3.7845 3.6847 3.5892 3.4976 3.4098 3.3255 47988 46389 4.4873 4.3436 42072 4.0776 3.9644 3.8372 7.1034 6.7499 6.4235 6.1218 5.8424 5.5831 4.7716 4.6065 4.4506 4.3038 4.1633 4.0310 5.0188 4.8332 4.6586 4.4941 4.3389 4.1925 5.0286 4.8364 4.6560 4.4865 4.3271 5.3423 5.1183 4.9096 4.7147 5.1971 4.9884 4.7932 4.6105 4.4382 4.30 14 15 16 17 18 19 20 25 40 50 60 13.0037 12.1062 11261 10.5631 9.8336 92950 8.7455 8.2442 13.8651 12.8493 11.9379 11.1184 10.3797 14.7179 13.5777 12.5611 11.6523 10.8378 10.1059 9.4466 8.8514 15.5623 142919 13.1661 12.1657 112741 104773 16.3983 14.9920 13.7535 12.6553 11.6896 108276 172260 15.6785 18.0456 16.3514 9.7122 25.8077 22.3965 39.1961 314256 9.1079 8.5595 8.0607 7.6061 9.7632 10.0591 25.728 214822 7.7862 73667 6.9819 14.8775 13.5903 12.4622 114699 10.5940 9.8181 9.3719 8.7556 82014 7.7016 72497 6.6282 6.3025 7.1909 6.8109 6.4624 6.1422 5.8474 5.5755 5.3242 5.0916 4.8759 4.6755 8.3126 78237 7.3792 6.9740 6.6039 6.2651 9.1216 8.5436 8.0216 7.5488 7.1196 6.7291 6.3729 6.0472 182559 15.7619 13.8007 12:2335 19.6004 172920 15.3725 13.7648 12.4090 112578 102737 94269 6.0021 5.7245 5.4675 5.2293 5.0081 4.8023 4.610 14.3238 13.1339 12.0853 11.1581 10.3356 9.6096 8.9501 8.3649 7.8393 7.3658 6.9080 6.5504 6.1982 32.8347 27.3555 23.1148 19.7923 17.1591 15.0463 13.3317 11.9246 10.7574 9.7791 8.9611 5.9542 8.6938 22.0232 19.5235 17.4131 15,6221 14.0939 12.7834 11.6536 10.6748 9.8226 9,0770 84217 7.2431 7.3300 6.8729 6.4641 6.0971 5.7662 5.4669 5.1951 4.9476 5.6685 5.4053 5.1624 4.9377 4.7296 5.7487 6.8399 6.4674 6.1280 5.8178 54746 52223 4.9897 4.7746 9.1285 8.5136 7.9633 7.4694 7.0248 6.6231 6.2593 5.9288 5.6278 5.3527 5.1009 4.8696 5.5339 5.2732 5.0333 4.8122 5.8775 5.5845 5.3162 5.0700 4.8435 8.0552 7.4967 7.0027 6.5660 6.1772 5.8294 5.5168 5.2347 4.9789 8.2438 7.6344 7.1050 6.6418 6.2335 5.8713 5.5482 5.2582 4.9966 10.9617 99148 9.0417 8.3045 76752 7.1327 6.6606 6.2463 5.8801 5.5541 5.2623 4.9996 44.9650 34.7609 27.6756 22.6236 18.9293 16.1614 14.0332 12.3766 11.0430 9.9672 9.0736 83240 7.6873 7.1401 6.6651 6.2402 5.8819 5.5553 5.2630 49999 QUESTION 5 5.1 WORKINGS (if any) PROJECT A PROJECT B 5.1.1 (3 marks) PAYBACK PERIOD: PROJECT A Investment Workings: Payback period is: 5.1.2 ACCOUNTING RATE OF RETURN: PROJECT B X [20 MARKS] (5 marks) 6.1.3 (6 marks) NPVI PROJECT A Year 1 2 3 4 5 Total PV Investment NPV NPV: PROJECT B Annual net cash flow Discount factor Total PV Investment NPV (positive) 5.1.4 Net Cash flows Discount Factor Present velus