Khaya (ltd) is evaluating two possible investment project and uses a 10% discount rate to determine their net present values.

Note: * Year five includes a P20,000 residual value for each investment project.

Required: a. Calculate the payback period for investment A. (4 marks) b. Calculate the discounted payback period for investment B.

\begin{tabular}{|l|l|l|l|} \hline Investment & & A P000 & B P000 \\ \hline Initial Investment & & 400 & 450 \\ Incremental cash flows: & Year 1 & 100 & 130 \\ & Year 2 & 120 & 130 \\ & Year 3 & 140 & 130 \\ & Year 4 & 120 & 130 \\ & Year 5 & 100 & 150 \\ Net present value & & 39 & 55 \\ \hline \end{tabular}