Project A	Project B
Initial Cost	1555000	1555000
Expected Life	7	7
Expected Scrap Value	0	0
Expected Net Cash flows	R	R
End of Year : 1	450000	420000
Year 2	420000	420000
Year 3	400000	420000
Year 4	200000	420000
Year 5	180000	420000
Year 6	350000	420000
Year 7	450000	420000
The company estimates that its cost of capital is 13%.

2.1 Calculate the Payback Period of both projects (answers expressed in years, months and days.) Which project would you choose on the basis of payback period? Why? (6 marks)

2.2 Calculate the Accounting Rate of Return for both projects (answer expressed to two decimal places). (6 marks)

2.3 Calculate the Net Present Value for both projects. (Round off amounts to the nearest Rand.) (6 marks)

2.4 Based on your calculations from 2.1 2.3, which project should Rothmans Limited choose? Why? .