Question 3 A. A project involves initial expenditure of $120 000 .The annual net receipts for each of the first five years are estimated to be $32 000. The companies cost of capital is 10%. Determine the following: i. The Payback period for the project ii. The Net Present value of the project iii. The Internal rate of return using discount rates of 10% and 14%. iv. Whether the project should be accepted. Give reasons for your answer. (2 marks) (4 marks) (4 marks) (4 marks) B. What is meant by the time value of money? What relevance does it have in capital investment decisions? (5 marks) C. Describe TWO (2) advantages and ONE (1) disadvantage of the Net Present value method of capital budgeting when compared to the payback period method. (6 marks) Note Discount factors at 10% and 14% are as follows: 10% 14% Year 1 0.909 0.877 2 0.826 0.769 3 0.751 0.675 4 0.683 0.592 5 0.621 0.519 PVIFA at 10% and five years = 3.79 (Total 25 marks)