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Question 3 3.1 An investment project costs R1 000 000. It is expected to have an annual net cash flow of R200 000 for six
Question 3 3.1 An investment project costs R1 000 000. It is expected to have an annual net cash flow of R200 000 for six years. What is the project's payback period? (5) 3.2 A company is evaluating two projects that are mutually exclusive with initial investments and cash flows as indicated in the table below. If the company has a required payback period of 2 years, which project should it reject and which project should it accept? Provide a reason for your answer (5) Project A Project B End of Year (Net cash flows) (Net cash flows) -R120 000 R40 000 R40 000 R80 000 0 1 2 3 -R40 000 R20 000 R20 000 R20 000 Question 3 = 10 marks
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