Instructions: All answers must be typed in and all workings must be shown.

QUESTION ONE As the financial manager of Gems Limited, you have to choose between two projects, Project A and Project B, whose cash inflows are not even. The project costs R200 000 and the net cash inflows for each year is as follows: Year Discount factor @ 15% 0.9524 1 Project A R 20 000 R 40 000 R60 000 2 Project B R100 000 R 80 000 R60 000 R20 000 0.9070 3 0.8638 0.8227 4 5 R 80 000 R100 000 R100 200 0.7835 6 0.7462 Required: 1.1 Calculate the payback period of each project. 1.2 Calculate the net present of each project. 1.3 Explain with reasons which project would Gems Limited choose