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

QUESTION 5 5.1 REQUIRED 5.1.2 Calculate the following from the information given below: 5.1.1 Payback Period (answer expressed in years). Return on investment (answer expressed to two decimal places). 5.1.3 Net Present Value INFORMATION Watford Limited intends investing in a new project. The following forecasts relate to one of the projects it can choose from: Initial cost R800 000 Useful life 4 years R100 000 14% Scrap value Minimum required rate of return Expected net profit: End of Year 1 Year 2 R45 000 R65 000 R145 000 Year 3 Year 4 R85 000 Watson Limited uses the straight-line method of depreciation. 5.2 REQUIRED Study the information given below and answer the following questions: 5.2.1 Calculate the project's Internal Rate of Return (answer expressed to two decimal places). 5.2.2 Based on the project's internal rate of return, should the company consider investing in the project? Why? 5.2.3 Suggest TWO (2) reasons why it is important to ensure that the project is financially viable. INFORMATION Deniel Limited is considering an investment in a project that costs R440 000. The project is expected to generate net cash flows of R130 000 per year for five years. The company's cost of capital is 15%. QUESTION 5 5.1 REQUIRED 5.1.2 Calculate the following from the information given below: 5.1.1 Payback Period (answer expressed in years). Return on investment (answer expressed to two decimal places). 5.1.3 Net Present Value INFORMATION Watford Limited intends investing in a new project. The following forecasts relate to one of the projects it can choose from: Initial cost R800 000 Useful life 4 years R100 000 14% Scrap value Minimum required rate of return Expected net profit: End of Year 1 Year 2 R45 000 R65 000 R145 000 Year 3 Year 4 R85 000 Watson Limited uses the straight-line method of depreciation. 5.2 REQUIRED Study the information given below and answer the following questions: 5.2.1 Calculate the project's Internal Rate of Return (answer expressed to two decimal places). 5.2.2 Based on the project's internal rate of return, should the company consider investing in the project? Why? 5.2.3 Suggest TWO (2) reasons why it is important to ensure that the project is financially viable. INFORMATION Deniel Limited is considering an investment in a project that costs R440 000. The project is expected to generate net cash flows of R130 000 per year for five years. The company's cost of capital is 15%