Phambili Ltd is in the pharmaceutical industry sector and has been expanding in the recent past due to a change in its strategic direction from regulated medicines to supplements and homeopathic remedies. The company has recently identified a project it wants you to evaluate and give recommendations on whether to reject or accept, among other things. You are provided with the following tabulated financial and additional information:

Details	Year1	Year2	Year3	Year4	Year5
	R000	R000	R000	R000	R000
Sales	36,750	54,023	61,586	69,770	70,451
Materials	5,885	9,075	11,979	14,714	14,495
Labour	11,770	18,150	23,958	30,746	28,989
Othervariableoverheads	525	662	752	851	957
Fixedoverheads	5,250	5,513	5,788	6,078	6,381
Otheroperatingcosts	3,120	3,353	3,600	3,978	4,015

Additionalinformation:

• Thetaxrateis28%andispayableintheyearprofitsaremade;
• Thecompanyisfinancedby75%equityand25%debt,withmarketvaluesofR75-millionand R25-million respectively. The company has an equity beta of 1.2. The rate on South African Treasury bills is 5% and considered to have no risk. The market risk premium is 7.5%. The companys after-tax cost of debt is 6%;
• Profitsaresimilartocashflowsforthepurposesofthisprojectevaluation; and
• All receipts and payments arise at the end of the year to which they relate except for the projects initial outlay of R30-million, which is paid at the beginning of the project (ie, immediately).

Required:

Giventheinformationabove,calculatethefollowing:

1. Profitsfortheperiods
2. Weightedaveragecostofcapital
3. Netpresentvalueoftheproposed project
4. Recommendationontheacceptanceorrejectionoftheproject withjustifications
5. Discuss the advantages of the net present value technique over the payback period and internal rate of return techniques when capital budgeting (10 marks)