Casio Limited is considering investing in new machinery and the following information is available:

Investment R300 000

Cost of capital 12%

Scrap value Nil

Net profit

Year 1 13 000

Year 2 10 000

Year 3 28 000

Year 4 37 000

Year 5 75 000

Additional Information: ·

The cost of the investment is R300 000 ·

Cost of capital = 12% ·

There is no scrap value Required:

Answer the following questions based on the information given above.

3.1 Calculate the accounting rate of return. (Answer expressed to two decimal places)

3.2 Calculate the payback period. (Answer in years, months and days)

3.3 If a payback period of 4 years is required, will the project be accepted? Why?

3.4 Calculate the net present value. (Amounts rounded off to the nearest Rand)

3.5 Based on the NPV, would the project be accepted? Why?