Dalton Ltd a manufacturer of high quality JoJo tanks has maintained stable annual sales of $500 000 for the past two years and is expected to remain stable for the next 5 years. Although the market for JoJo tanks has been expanding, Dalton Ltd could not share in this growth due to the technical problems experienced with the current machine. To increase its production and sales, the company is considering replacing the current injection moulding machine with a more technically advanced model which will cost the company $3 000 000.The outlay would be offset partially by the sale of the old machine. The old machine cost $1 500 000 two years ago and can be sold currently for $500 000 before tax. The lifespan of the old machine was originally six years and depreciation is calculated on a straight line basis. The total fixed operating costs for the old machine is $80 000 (excluding depreciation) and will be constant for the next five years.As a result of the acquisition of the new machine, sales are expected to increase by 5 000 units in each of the next three years and to stabilise in the following two years. The new injection moulding machine will be depreciated on a straight-line basis over five years and will be terminated and sold at end of the fifth year for a scrap value of $600 000.The company is currently selling 25 000 tanks annually. The total fixed operating costs of $120 000 (including depreciation) will be constant for the next five years. Variable cost per unit per year total R5.As a result of switching to the new machine management expects cash to increase by $20 000, accounts receivable by $40 000 and inventory by $60 000. At the same time, accounts payable will increase by $50 000, accruals by $10 000 and long-term debt by $100 000.Dalton Ltd's cost of capital is 11%. Assume a tax rate of 29%.

1. The internal rate of return for the project would be closest to .

1. 8%

2. 11%

3. 14%

4. 17%

2. The net present value for the project is closest to .

1. R876.91

2. R906.91

3. R930.91

4. R970.91

3. Calculate the number of units which must be sold in order to achieve a net profit before tax of R148 800 in the first year.

1. 14 920 units

2. 15 920 units

3. 16 920 units

4. 17 920 units