PERFORMANCE EVALUATION TUTORIAL QUESTIONS QUESTION 1 A company invested in a new machine at a cost of N$150 000 The life of the machine is 3 years and the market value at the end of that period is zero. Wear and tear is allowed by the receiver at NS50 000 per annum. Depreciation will also be allowed in equal amounts over 3 years. The income and expenditure account over the next 3 years is projected as follows: Year Year2 Year 3 Operating income 100 000 130 000 170 000 Interest Depreciation Earnings before tax 30 000 68 000 110 000 (20 000) (12 000) (10 000) (50 000) (50 000) (50 000) (9 000) (20 400) (33 000) 21 000 47600 77 000 ax Earnings after tax Additional information . Tax rate 30% WACC 18% . Required return before tax 3000 You are required to: a) Determine whether the company should invest in the project or not? Justify your answer b) Calculate the year-by-year Return On Investment (ROI) and the average ROI over the 3-year period c) Calculate the annual Residual Income d) Calculate the annual Economic Value Added (EVA) and the present value (PV) of the EVA values