Note: Where discount factors are required, use only the present value tables (Appendix 1 and 2) that appear after QUESTION 5. REQUIRED Study the information provided below and calculate the following: 5.1 Payback Period of both projects (expressed in years, months and days). 5.2 Accounting Rate of Return on average investment of Project A (expressed to two decimal places). 5.3 Net Present Value of both projects. Your answer must include the calculations of the present values and NPV. 5.4 Internal Rate of Return of Project B (expressed to two decimal places). Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation. INFORMATION The following information relates to two capital investment projects that are under consideration by Alpha Limited. Initial cost Expected life Scrap value Expected net profit: Year 1 Year 2 Year 3 Year 4 Year 5 Project A Project B R600 000 R600 000 5 years 5 years 0 0 R R 80 000 70 000 70 000 70 000 60 000 70 000 50 000 70 000 40 000 70 000 The company estimates that its cost of capital is 12%. The straight-line method of depreciation is used. Ignore taxes. Table 1: Present value of R1 APPENDIX 1 Number 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 16% 17% 18% Periods 08264 0.7513 0.6830 0.990 0.9804 0.9709 0,9615 0.9524 0.9434 0.9346 0.9259 09174 09091 0.9009 0.8929 0.88 S 0.8772 0.8696 0.8621 0.8547 0.8475 0.8403 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 08116 0.7972 0.7831 0.7695 0.7561 0.7432 0.7305 0.7182 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 08163 0.7938 0.7722 07312 0.7118 0.6931 0.6750 0.6575 0.6407 0.6244 0686 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 07350 0.70 0.5718 0.5523 0.5137 0.5158 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 06499 19% 20% 08333 0.8000 25% 0.6944 0.6400 6 X 9 10 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.5346 0.5066 0.480 0.4556 0.4323 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.4817 0.4523 0.4251 0.3996 0.3759 0.9235 0.8535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4339 04039 0.3762 0.3506 0.3269 0.9143 0.8368 0,7664 0.7026 0.6446 0.5919 0.5439 0.5002 04604 04241 0.3606 0.3329 0.3075 0.2843 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 04224 0.3855 0.3522 0.3220 0.2946 0.2097 0.6663 0.6302 0.5963 0.5645 06227 0.5835 05470 0.5132 0.6587 06355 0.6133 0.5935 0.5674 05428 0.5194 0.4972 0.4761 0.4561 04371 04104 0.3898 0.370 0.3521 0.3349 0.2621 0.3538 0.3332 0.3139 0.2959 0.2791 0.2097 0.5934 0.5787 0.5120 0.4987 0.4823 0.4096 04190 0.4019 0.3277 0.2472 0.3050 0.2848 0.2660 0.2487 0.2326 0.1678 0.2434 0.2255 0.2090 0.1938 0.1342 0.2267 0.2080 0.1911 0.1756 0.1615 0.1074 1 0.8963 0.8043 0.7224 0.6496 0.5847 0.5268 04751 0.4289 0.3875 0.3505 0,8874 0.7885 0.7014 0.6246 0.5568 0.4970 0.3971 0.3555 03186 0.2858 0.2567 0.2307 02076 0.1869 0.1685 0.1520 0.1372 0.1240 0.1122 0.0687 03173 0.2875 0.2607 0.2366 0.2149 0.1954 0.1778 0.1619 01476 0.1346 0.0859 13 0.8787 0.7730 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 0.2897 0.2575 0.2292 0.2042 0.1821 0.1625 0.1452 01290 0.1163 0.1042 0.0935 0.0550 14 15 0.8700 0.7579 0.6611 0.5775 0.5051 0.4423 0.3878 0.3405 0.2992 0.2633 0.2320 0.2046 0.1807 0.1597 0.1413 0.1252 0.1110 0.0985 0.0876 0.0779 0.0440 0.8613 0.7430 0.6419 0.5553 0.4810 0.4173 0.3624 0.3152 0.2745 02394 0.2090 0.1827 0.1599 0.1401 0.1229 0.1079 0.0949 0.0835 0.0736 0.0649 0.0352 17 18 20 25 0.8528 0.7284 0.6232 0.5335 0.4581 0.3936 0.3387 02919 0.2519 02176 0.1883 0.1631 0.1415 0.1225 0.1069 0.0930 0.8444 0.7142 0.6050 0.5134 0.4363 0.3714 0.3166 0.2703 0.2311 0.1978 0.1696 0.1456 0.1252 0.1071 0.0929 0.080 0.8360 0.7002 0.5874 0.4936 0.4155 0.3503 0.2959 0.2502 0.2120 0.1799 0.1528 0.1300 0.1108 0.0946 0.0808 0.0691 19 0.8277 0.6864 0.5703 0.4746 0.3957 0.3305 0.2765 0.2317 0.1945 0.1635 0.1377 0.1161 0.0981 0.0829 0.0703 0.0596 0.8195 0.6730 0.5537 0.4564 0.3765 0.3118 0.2584 0.2145 0.1784 0.1486 0.1240 0.1037 0.0868 0.0728 0.0611 0.0514 0.7798 0.6095 0.4776 0.3751 0.7419 05521 04120 0.308 0.2314 0.1741 0.1314 0.0994 0.0754 0.0573 0.0437 0.0134 0.0256 0.0196 00LSI 0.0116 0.0090 0.6717 0.4529 0.3066 0.2083 0.1420 0.0972 0.0668 0.0460 0.0318 0.0221 0.0154 0.0107 0.0075 0.0053 0.0037 0.0026 0.0019 50 0.6080 0.3715 0.2281 0.1407 0.0872 0.0543 0.0339 00213 0.0134 0.0085 00054 0.0035 0.0022 0.0014 0.0009 0.0006 0.0004 0.0003 0.5504 0.3048 0.1697 0.0951 0.0535 0.0303 0.0173 0.0099 0.0057 0.0033 0.0019 0.0011 0.0007 0.0004 0.0002 0.0001 0.0001 0.0811 0.0705 0.0618 0.0541 0.0281 0.0693 0.0600 0.0520 0.0451 0.0225 0.0592 0.0508 0.0437 0.0376 0.0180 0.0506 0.0431 0.0367 0.0313 0.0144 0.0433 0.0365 0.0308 0.0261 0.0115 0.2953 0.2330 0.1842 0.1460 0.1160 0.0923 0.0736 0.0588 0.0471 0.0378 0.0304 0.0245 0.0197 0.0160 0.0070 0.001 0.0129 0.0105 0.0038 0.0054 0.0042 0.0012 0.0010 0.0007 0.0001 0.0002 0.0001 Number APPENDIX 2 Table 2: Present value of a regular annuity of R1 per period for n periods of Periods 5 6 K 10 13 14 15 17 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 0.9434 PEEK T 14% 15% 10% 17 % 18% 19% 20% 0.8547 0.8475 0.8403 0.8333 1.7155 1.7125 16901 L6681 16467 16257 16052 15852 1.5656 15465 1.5278 09901 09804 0.9705 09615 0.9524 0.9346 0.9259 09174 09091 0.9009 0.8929 0.8850 08772 0.8696 0.862) 1.9704 1.9416 19135 18861 1.8594 1.8080 1.7833 1.7591 2.9410 2.8839 2.8286 27751 2.7232 2.6730 2.6243 5771 2.5313 2.4869 2.4437 2.4018 2.3612 23216 2.2832 2.2450 2.2096 2.1743 2.1399 2.1065 3.9020 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 3.1024 3.0373 29745 29137 2.8550 2.7982 2.7432 2.6386 2.5887 3.6048 3.5172 3.4331 3.3522 1.2743 3.1993 3.1272 3.0576 29906 4.8534 4.7135 4.5797 4.4518 4.32 4.2124 4.1002 3.9927 3.8897 3.7908 1.6959 5.7955 5.6014 5.4172 5.2421 50757 4.9173 4.7665 4.6229 4.4859 6.7282 64720 6.2303 6.0021 5.786 5.5824 5.3893 5.2064 5.0330 7.6517 7.3255 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.5348 8.5660 8.1622 7.7861 7.4353 7.1078 6.8017 65152 6.2469 5.9952 94712 8.5300 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 87605 8.3064 7.4987 7.1390 6.8052 6.4951 6.2065 5.9377 5.6869 5.4527 5.2337 5.0286 4.8364 8.8633 8.3838 7.9427 7.5361 6.8137 6.4924 6.1944 5.9176 56601 5.4206 5.1971 3.9975 3.8887 3.7845 3.6847 3.5892 3.4976 3.4098 3.3255 4.8684 4.7122 4.5638 4.4226 47883 4.1604 4.0386 3.9224 3.8115 3.7057 3.6046 5.3349 5.1461 4.9676 4.7988 4.6389 4.4873 4.3436 4.2072 4.0776 3.9544 3.8372 5.5370 5.3282 5.1317 4.9464 4.7716 4.6065 4.4506 4.3038 4.1633 4.0310 6.1446 5.8892 5.6507 5.4262 5.2161 5.0188 4.8332 4.6586 4.4941 4.3389 4.1925 10.3676 9.7868 9.2526 11.2551 10.5753 9.9540 9.3851 4.4865 4.3271 4.6105 4.4392 12.1337 11.3484 10.6350 9.9856 9.3936 8.8527 8.3577 7.9038 74869 7.1034 6.7499 64235 6.1218 5.8424 5.5831 5.3423 5.1183 4.9095 4.7147 4.5327 13.0037 12.1062 11.2961 10.5631 9.8986 9.2950 8.7455 82442 7.7863 7.3667 6.9819 6.6282 6.3025 60021 5.7245 5.4675 5.2293 5.0081 48023 4.6106 13.8651 12.8493 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 8.060 7.6061 7.1909 6.8109 6.4624 6.1423 5.8474 5.5755 5.3242 5.0916 4.8759 4.6755 10.8378 10.1059 94406 K8514 K3126 7.8237 73792 69740 6.6039 6.2651 5.9542 5.6685 5.4053 5.1624 4.9377 4.7206 15.5623 14.2919 13.1661 12.1657 11 2741 10.4772 9.7612 91716 85436 8.0216 7.5488 7.1196 6.729 6.3729 6.047 5.748 5.4746 5.2223 4.9897 4.7746 16.3983 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 8.7556 .2014 7.7016 7.2497 6.8399 6.4674 6.128 5.8178 5.5339 5.2732 5.0333 4.8122 17.2260 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 9.6036 8.9501 8.3649 7.8393 18.0456 16.3514 14.8775 13.5903 12.4622 114699 10.5940 9.8181 9.1285 8.5136 7.9633 14.7179 13.5777 12.5611 11.6523 22.0232 19.5235 17.4131 15.6221 14.0939 12.7834 30 50 60 7.3658 6.9380 6.5504 6.1982 5.8775 5.5845 5.3162 5.0700 4.8435 7.4694 7.0248 6.6231 6.2593 59288 5.6278 5.3527 5.1009 4.8 11.6536 10.6748 9.8226 90770 7.8431 7.3300 68729 6.4641 60971 5.7662 5.4669 5.1951 4.9476 25.8077 22.3965 19.6004 17.2920 15.3725 13.7648 12.4090 11.2578 10.2737 9.4269 8.6938 8.0552 7.4957 7.0027 6.5660 6.1772 5.8294 5.5168 5.2347 4.9789 32.8347 27.3555 23.1148 19.7928 17.1591 15.0463 13.3317 11.9246 10.7574 9.7791 89511 8.2438 7.6344 7.1050 6.6418 6.2335 5.8713 5.5482 5.2582 4.9966 39.1961 31.4236 25.7298 21.4822 18.2559 15.7619 13.8007 12.2335 10.9617 9.9148 9.0417 8.3045 7.6752 7.1327 6.6605 6.2463 5.8801 5.5541 5.2623 4.9995 44.9550 34.7609 27.6756 22.6235 18.9293 16.1614 14.0392 12.3766 11.0480 9.9672 9.0736 8.3240 7.6873 7.1401 6.6651 6.2402 5.8819 5.5553 5.2630 4.9999