QUESTION 4 (20 Marks) Fila Holdings has a strategic objective of achieving 10% growth in sales over the next 4 years. As part of this drive it is considering launching a new product which will require new equipment to be purchased. The following information relates to the new product and equipment: Cost of equipment Scrap value R220 000 Nil Year 2 Year 1 Year 3 Year 4 Unit sales Selling price per unit Variable cost per unit Fixed cost per year (excluding depreciation) 6 000 units R80 R60 R50 000 6 200 R82 R62 R55 000 6 500 R85 R65 R60 000 6 600 R88 R67 R64 000 Depreciation for accounting and tax purposes is provided on the straight-line basis. The taxation rate is 28% and the required return on capital is 12%. REQUIRED Study the information provided above and answer the following questions: 4.1 Calculate the operating cash flows for each of the four years. (8 marks) 4.2 Calculate the Payback period for the equipment (Answers must be expressed in years and months) (2 marks) 4.3 Calculate the Accounting rate of return (4 marks) 4.4 Calculate the Net Present Value. (Round off amounts to the nearest Rand.) (4 marks) 4.5 Would you advise Fila Holding to invest in this equipment. (Provide reasons) (2 marks)