Guidelines: All answers must be typed out and workings must be showing.

QUESTION 3 REQUIRED 3.1 Calculate the Payback period of Machine A (answer expressed in years, months and days) 3.2 Calculate the Accounting Rate of Return on average investment of Machine B (answer expressed to two decimal places). 3.3 Based on the accounting rate of return, should Machine B be favourably considered for investment? Why? 3.4 Calculate the Net Present Value of both machines. 3.5 Calculate the Internal Rate of Return of Machine B (answer expressed to two decimal places). 5 years INFORMATION Vierra Limited intends purchasing a new machine and has a choice between the following two machines: Machine A Machine B Initial cost R400 000 R400 000 Expected useful life 5 years Scrap value 0 0 Expected net cash flows: R R End of Year 1 20 000 40 000 Year 2 30 000 40 000 Year 3 70 000 40 000 Year 4 60 000 40 000 Year 5 40 000 40 000 The company estimates that its cost of capital is 12%. Depreciation is calculated using the straight-line method