Instructions: All answers must be typed in and working must be shown.

QUESTION 4 INVESTMENT APPRAISAL Santani Traders has investigated the possibility of investing in a new machine. The following data has been extracted from the reports relating to the project: Cost of machine Expected economic life Depreciation method Cost of capital Year Profit 1 25 000 2 15 000 3 20 000 4 10 000 R100 000 4 years Straight-line 13% Cash flow 50 000 40 000 45 000 35 000 Required: Calculate the following for the project: 4.1 Accounting rate of return. 4.2 Payback period (years, months and days) 4.3 If the cut off period is 2 years, will the current payback period be accepted? Why? 4.4 Net present value (Amounts to the nearest Rand) 4.5 On the basis of the net present value will the project be accepted? Why