npv table

QUESTION 2 25 MKS The directors of on Ltd are currently considering two mutualy exclusive investment projects. Both projects are concerned with the purchase of newr plant. The following data is available. Project 1 Project 2 Initial investments R110 000 R713 000 Expected annual operating cash ow Year 1 R60 000 R36 000 Year 2 R30 000 R16 000 Year 3 R40 000 R28 000 Estimated residual value of project at year end of year R8 000 R5 000 The business has an estimated weighted average cost of capital {WAGE} of 12%. The projects depreciate for accounting purposes over their useful lives on straight line basis (this depreciation has already been accounted for in the above operating cash ows]. Neither project would increase the working capital of the business. Additional lnfonnation: I Ignore taxation. I The business has sufficient funds to meet all capital expenditure requirements. REQUIRED MARKS I la) Calculate tor each project: I. The net present value lNPVj. E .2- Calculate the lnternsl Rate of Return {IRE}. It the minimum rate of return Is 15 '15. suggest with reason whether you \ / ill} t ii. The discounted payback period. should accept the project or not