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QUESTION 2 [20 MARKS) Masego Pty Ltd considers buying a Truck as the business expands. They are considering between buying Truck Yor Truck Z. They
QUESTION 2 [20 MARKS) Masego Pty Ltd considers buying a Truck as the business expands. They are considering between buying Truck Yor Truck Z. They will be spending P140 000 on Truck Y and P160 000 on Truck Z. The discounting factor for the above trucks is 16%. The cash inflows and outflows are shown below: Year 0 1 2 3 Truck Y Net cash flow (140 000) 50 000 60 000 50 000 40 000 Truck z Net cash flow (160 000) 85 000 90 000 75 000 65 000 Required: a. Calculate the payback period for each truck. Which truck should the business buy and why? (6 marks) b. Calculate the discounted payback for each truck. (8 marks) c. What is the Net Present Value for each truck? (2 marks) d. Calculate the profitability index for each truck. (4 marks)
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