Note: Where applicable, use the present value tables provided in APPENDICES $1$ and $2$ that appear after QUESTION $5.$ REQUIRED Use the information provided below to answer the following questions: $5\mathrm{.}1$ Calculate the Payback Period of Machine A $($expressed in years, months and days.$)5\mathrm{.}2$ Calculate the Accounting Rate of Return on average investment of Machine A $($expressed to two decimal places$).5\mathrm{.}3$ Calculate the Net Present Value $($NPV$)$ of both machines. $5\mathrm{.}4$ Based on the Net Present Value, which machine should Aspen Limited purchase? Why? $5\mathrm{.}5$ Calculate the Internal Rate of Return $($IRR$)$ of Machine B $($expressed to two decimal places$).$QUESTION $5$

Note: Where applicable, use the present value tables provided in APPENDICES $1$ and $2$ that appear

after the formula sheet.

REQUIRED

Use the information providad below to answer the following questions:

$5\mathrm{.}1$ Calculate the Payback Period of the first altarnative $($expressed in years, months and days$).(3$ marks$)$

$5\mathrm{.}2$ Calculate the Accounting Rate of Retum on inifial investment of the first aliernative

$($expressed to two decimal places$).(4$ marks$)$

$5\mathrm{.}3$ Based on the Net Present Valua, which allernative should be chosen? Why? $($Show the calculations of the

present values as well as the net present values.$)(8$ marks$)$

$5\mathrm{.}4$ Calculate the Internal Rate of Return $($expressed to two decimal places$)$ of the first alternative. Your answer

must include two nat present value calculations $($using consecutive rates$/$percentages$)$ and interpolation.

$(5$ marks$)$

INFORMATION

The management of Torga Limited is considering two investment opportunitias:

The first alternative involves the purchase of new machinary for R$1200000$ which will enable the company to

modernise its production faclity. The machinery is expected to have a usaful life of five years and no salvage

value is anticipated. On the day Torga Limited purchases the new machinery, it would also pay the suppliar R$60$

$000$ for installation costs. The modernisation is expected to increase efficiency, resulting in a reduction in annual

cash operating expenses of R$380000.$

The second alternative involves purchasing a truck. The truck costs R$1200000.$ Its useful life is expected to

be five years and a salvage value of R$300000$ is anticipated. Operating the truck will necessitate an increase

of R$60000$ in the company's working capital base immadiataly upon buying the truck. The working capital

cash outflow is expecled to be recovered at the end of the truck's useful lffe. The truck is expected to generate

R$730000$ per year in additional cash revenues. The driver's salary and other cash operating expenses are

expecled to be R$360000$ per year.

Torga Limited desires a rate of retum of $12\%.$ The straight$-$line mathod of depreciation is used. Ignore taxas.