APPENDIX 1 Present value of R1: PVFA (k,n) = 1 (1 + K) = 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 25% Number of Periods 1 2 3 4 5 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9346 0.9259 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.87720.8696 0.8696 0.8621 0.85470.8475 0.8403 0.8333 0.8000 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.87340.8573 0.8417 0.8264 0.8417 0.8264 0.8116 0.79720.7831 0.7695 0.7695 0.7561 0.7432 0.7432 0.7305 0.7305 0.7182 0.7062 0.6944 0.6400 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.79380.7722 0.7513 0.7312 0.7118 0.6931 0.6750 0.6575 0.6407 0.6244 0.6086 0.5934 0.5787 0.57870.5120 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6587 0.6355 0.6133 0.5921 0.5718 0.5523 0.5337 0.5158 0.4987 0.4823 0.4096 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.7130 0.68060.6499 0.6209 0.5935 0.5674 0.5428 0.51940.4972 0.4761 0.4561 0.4371 0.41900.40190.3277 6 6 7 8 9 10 0.9420 0.8880 0.8375 0.79030.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 0.5066 0.48030.4556 0.4323 0.4104 0.3898 0.3704 0.3521 0.3349 0.2621 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3759 0.3759 0.3538 0.3332 0.3139 0.2959 0.2791 0.2097 0.9235 0.8535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.43390.40390.3762 0.3506 0.3762 0.35060.3269 0.30500.2848 0.2660 0.24870.2326 0.1678 0.9143 0.8368 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.46040.4241 0.39090.3606 0.3329 0.3075 0.2843 0.2630 0.2434 0.2434 0.2255 0.2090 0.1938 0.1342 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 0.3220 0.2946 0.2697 0.2472 0.2267 0.2080 0.1911 0.1756 0.1615 0.1074 11 12 13 14 15 0.89630.8043 0.7224 0.6496 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.3173 0.2875 0.2607 0.2607 0.2366 0.2149 0.1954 0.1778 0.1778 0.1619 0.1619 0.1476 0.1346 0.0859 0.8874 0.7885 0.70140.6246 0.55680.4970 0.4440 0.3971 0.6246 0.5568 0.4970 0.4440 0.39710.3555 0.3186 0.2858 0.3555 0.3186 0.2858 0.2567 0.2307 0.2076 0.1869 0.1685 0.15200.1372 0.1240 0.1122 0.0687 0.8787 0.7730 0.68100.6006 0.5303 0.4688 0.41500.3677 0.3262 0.2897 0.2575 0.2292 0.2042 0.1821 0.1625 0.1452 0.1299 0.1163 0.1163 0.1042 0.0935 0.0935 0.0550 0.8700 0.7579 0.75790.6611 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 0.1110 0.0985 0.0876 0.0779 0.0440 0.8613 0.7430 0.6419 0.5553 0.4810 0.4173 0.3624 0.3152 0.2745 0.2394 0.2090 0.1827 0.1599 0.1401 0.1229 0.1079 0.0949 0.0835 0.0736 0.0649 0.0352 16 17 18 19 20 0.8528 0.7284 0.62320.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.2176 0.1883 0.1883 0.1631 0.1415 0.1229 0.1069 0.0930 0.0811 0.0708 0.0618 0.0541 0.0281 0.8444 0.7142 0.6050 0.5134 0.4363 0.3714 0.3166 0.27030.2311 0.1978 0.1696 0.1456 0.1252 0.1078 0.1078 0.0929 0.0802 0.06930.0600 0.05200.0451 0.0225 0.8360 0.7002 0.5874 0.4936 0.4936 0.4155 0.3503 0.2959 0.2502 0.2120 0.1799 0.1528 0.1300 0.1108 0.0946 0.0808 0.0691 0.0592 0.0508 0.0437 0.0376 0.0180 0.8277 0.6864 0.5703 0.4746 0.3957 0.3305 0.2765 0.23170.1945 0.1635 0.1377 0.1161 0.0981 0.0829 0.0703 0.0596 0.0596 0.0506 0.0431 0.0367 0.0313 0.0144 0.8195 0.67300.5537 0.4564 0.3769 0.3118 0.2584 0.21450.1784 0.1486 0.1240 0.1037 0.0868 0.0728 0.0611 0.0514 0.0514 0.0433 0.0365 0.0308 0.0261 0.0115 25 30 40 50 60 0.7798 0.60950.4776 0.3751 0.2953 0.2330 0.1842 0.1842 0.1460 0.1460 0.1160 0.0923 0.0736 0.0588 0.0471 0.0378 0.0304 0.0245 0.0197 0.0160 0.0129 0.0105 0.0038 0.7419 0.5521 0.41200.3083 0.2314 0.1741 0.1314 0.0994 0.0754 0.0573 0.0437 0.0334 0.0256 0.0196 0.0151 0.0116 0.0090 0.0070 0.0054 0.0042 0.0012 0.6717 0.45290.3066 0.2083 0.1420 0.0972 0.0668 0.0460 0.0318 0.0221 0.0154 0.0107 0.0075 0.0053 0.0037 0.0026 0.0026 0.0019 0.0019 0.0013 0.0010 0.0007 0.0001 0.6080 0.3715 0.2281 0.1407 0.0872 0.0543 0.0339 0.0213 0.0134 0.0085 0.0054 0.0035 0.0022 0.0014 0.0009 0.0006 0.0004 0.0003 0.0002 0.0001 0.5504 0.3048 0.1697 0.0951 0.0535 0.0303 0.01730.0099 0.0057 0.0033 0.0019 0.0011 0.0007 0.0004 0.0002 0.0001 0.0001 QUESTION 3 (20 Marks) Note: Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after question 5. (3 marks) REQUIRED Use the information provided below to answer the following questions: 3.1 Calculate the Payback period of Project B (answer expressed in years, months and days). 3.2 Calculate the Accounting Rate of Return on average investment) of Project A (answer expressed to two decimal places). 3.3 Calculate the Benefit Cost Ratio of both projects (answers expressed to three decimal places). Refer to your answers in question 3.3. Which project should be chosen? Why? 3.5 Calculate the Internal Rate of Return of Project A, assuming that it has no scrap value (answer expressed to two decimal places). (5 marks) (6 marks) (1 mark) 3.4 (5 marks) INFORMATION Mellou Limited has the option to invest in Project A or Project B, since finance is only available to invest in one of them. You are given the following projected data: Project A Project B R R Initial cost 500 000 500 000 Scrap value 20 000 0 Annual net profit Year 1 34 000 40 000 Year 2 44 000 40 000 Year 3 64 000 40 000 Year 4 74 000 40 000 Year 5 14 000 40 000 Additional information 1. Depreciation is calculated using the straight-line basis. 2. The discount rate used by the company is 12%