Question 1 TUTORIAL 2: PROJECT SELECTION How much would you have to invest now to earn R100 in one year's time if the interest rate was 5%? Question 2 (also in class notes) A company is considering the purchasing of equipment with the following cashflow: Cash Flow Timing/ Years 0 Project Cash Flow (R) 1 2 3 4 (30 000) 6 000 8 000 15 000 18 000 Given that: The company has a policy of not taking investments with a payback of more than 5 years. The company's cost of capital is 18%. a) Determine the Payback Period. Based on the payback, should the company invest in this equipment? Why? [2] b) Calculate the ROI. Based on the ROI, should the company go ahead with the purchasing? Why? [8] c) For the company in question, what would be the IRR? (Use another Discount factor of 20%). [8]