Question 12 The directors of Dundee Ltd, a tentile manufacturor, are deciaing whether to purchase some new equipment which will speed up the production process. The cash flows that are expected to be generated trom the new equipment are as follows: Benchmarks Payback period 2.5 years Accountina rate of retum - initial method 5% Acoounting rate of retum - average method 12% REQUIRED: a) (i) Calculate the payback period. (i) Should Dundee Ltd purchase the equipment according to this method? (3 maks) b) (i) Calculate the Accounting Rate of Return (using the initial method) (ii) Should Dundee Lid purchase the equipment according to this imethod? (4 mark) c) (i) Calculate the Acoounting Rate of Retum (using the average metod) (ii) Should Dundee Ltd purchase the equipment according to this method? (4 mark) d) (i) Calculate the net present value using a discount rate of 10%. (ii) Shoud Dundee Lid purchase the equipment according to this method? (4 marks) e) Calculate the intemal rate of retum (3 mans) 7) Explain, with reasons, whether you would you recommend the conpary to purchase the equipment overal? (3 marks) Puge 9 of 12 9) Identity TWO advanteges and TWO disadvantages of the accounting rate of return approach to making a deciaion. (4 marks)