1. Based on the information given, what is the preferred project based on the payback period method?

The financial manager of Levi Limited is considering borrowing R 420 million at an interest rate of 9% and considering two projects - Project A and Project B. Since shareholders have been on the neck of managers, this will allow them to distribute R 420 million of its free cash flow as dividends to Shareholders in the 2023 financial year. Given that the existing projects are long-term projects, the financial manager is looking for a project that will deliver the quickest payback to shore up dividend payments over the short term. The required rate of return for Levi Ltd's equity is 12%, the prime rate is 8% and the inflation rate is 7%. The risk profiles of both projects are approximately the same as the company's current risk profile, therefore the hurdle rate is also 12%