QUESTION 2

fit. (3) QUESTION 2 As a financial manager of Xerox Enterprises, you are required to analyse two proposed capital investments, Projects (20) A and B. Each has a cost of R100 000, and the cost of capital for each project is 12%. Depreciation on each project is estimated at R25 000 per year. The projects' expected profit are as follows: Project A Project B Year 1 2 3 4 R40 000 R5 000 R5 000 (R15 000) R10 000 R10 000 R10 000 R10 000 (8) Required 2.1 Calculate the payback period for each project (In years, months and days). 2.2 Calculate the NPV for each project. 2.3 Indicate with a reason which project should be chosen by Xerox Enterprises. 2.4 Calculate the ARR for project A. (3) 59