(42 marks) Namibia Ltd is considering investing in a new machine in order to reduce operating costs over the next five years. Machines A and B are currently being considered, the details of which are as follows: Question 4 Machine B N$ 800 000 180 000 75 000 The above cost savings have been calculated after the deduction of depreciation on a straight-line basis over the life of the investment. Capital cost Residual value Annual cost savings Due to liquidity considerations, the managing director requires the project to have a payback period of less than four years. The company's cost of capital is 10%. Required 4.1 4.2 Machine A N$ 600 000 100 000 60 000 4.4 Evaluate each of the machines A and B, using each of the following methods: 4.1.1 Accounting rate of return using the average capital invested 4.1.2. Payback period 4.1.3 Net present value Advise management, giving two reasons, as to which machine, if either, to purchase. For each machine, calculate a discounted payback period (using 4.3 discounted cash receipts), and state, giving reasons, whether this would have any effect on your answer to (4.2) above Assuming machine A is chosen, calculate the sensitivity of the machine to: (i) (iii) Total marks Cost of capital Annual savings Initial investment Marks Sub- total 4 4 12 4 00 8 Total 10 42 4884 20 24 32 42