QUESTION 5 (20 MARKS) 5.1 REQUIRED Use the information provided below to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 5.1.1 Payback Period (expressed in years, months and days) (3 marks) 5.1.2 Accounting Rate of Return, on average investment (expressed to two decimal places) (4 marks) 5.1.3 Internal Rate of Return (expressed to two decimal places) (6 marks) INFORMATION Redd Ltd intends purchasing a machine. The following details relate to this machine: Purchase price R1 200 000 Expected useful life 4 years Minimum required rate of return 12% Scrap value R0 Depreciation Straight-line method Net profit per year: 1st year R40 000 2nd year R100 000 3rd year R130 000 4th year R150 000 5.2 REQUIRED Use the information provided below to answer the following questions: 5.2.1 Calculate the Net Present Value. (6 marks) 5.2.2 Should the project be considered for acceptance? Why? (1 mark) INFORMATION Schroder Limited is looking at the possibility of investing in a new project. The project would cost R1 000 000, and its cash operating expenses would total R210 000 per year. On the benefit side, it is estimated that the new project would generate cash revenues of R470 000 per year. The project will have a useful life of five years and is expected to have a scrap value of R90 000. The cost of capital is 12%. 
APPENDIX 1 Present value of R1 Number of 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 25% Periods 1 0.8772 0.9434 0.8900 0.8696 0.7561 2 0.9901 0.9804 0.9709 0.9615 0.9524 0.9803 0.9612 0.9426 0.9246 0.9070 0.97060.9423 0.9151 0.8890 0.8638 0.9610 0.9238 0.8885 0.8548 0.8227 0.9515 0.9057 0.8626 0.8219 0.7835 0.9346 0.9259 0.9174 0.9091 0.9009 0.8929 0.8850 0.8734 0.8573 0.8417 0.8264 0.8116 0.7972 0.7831 0.8163 0.7938 0.7722 0.7513 0.7312 0.7118 0.6931 0.7629 0.7350 0.7084 0.6830 0.6587 0.6355 0.6133 0.7130 0.6806 0.6499 0.6209 0.5935 0.5674 0.5428 0.8621 0.7432 0.6407 0.5523 3 0.8547 0.7305 0.6244 0.5337 0.7695 0.6750 0.5921 0.8475 0.7182 0.6086 0.5158 0.8396 0.8403 0.8333 0.8000 0.7062 0.6944 0.6400 0.5934 0.5787 0.5120 0.4987 0.4823 0.4096 0.4190 0.4019 0.3277 4 0.6575 0.5718 0.4972 0.7921 5 0.7473 0.5194 0.4761 0.4561 0.4371 6 0.9420 0.8880 0.4104 0.7903 0.7599 0.5963 0.5645 0.5470 0.5132 7 0.7462 0.7107 0.6768 0.3538 0.8375 0.8131 0.7894 0.7664 0.7441 8 0.7307 0.7050 0.6651 0.6274 0.5919 0.5584 0.6663 0.6227 0.5820 0.5439 0.5083 0.9327 0.8706 0.9235 0.8535 0.9143 0.8368 0.9053 0.8203 0.6302 0.5835 0.5403 0.5002 0.4632 0.3898 0.3332 0.2848 0.5019 0.4665 0.5346 0.5066 0.4803 0.4817 0.4523 0.4251 0.43390.4039 0.3762 0.3909 0.3606 0.3329 0.3522 0.3220 0.2946 0.4556 0.3996 0.3506 0.3075 0.2697 0.4323 0.3759 0.3269 0.2843 0.2472 0.3704 0.3139 0.2660 0.2255 0.1911 0.3521 0.3349 0.2621 0.2959 0.2791 0.2097 0.2487 0.2326 0.1678 0.2090 0.1938 0.1342 0.1756 0.1615 0.1074 9 0.7026 0.6446 0.3050 0.2630 0.2267 0.4604 0.4241 0.2434 10 0.6756 0.6139 0.4224 0.3855 0.2080 11 0.5268 0.4751 0.4289 0.2366 0.2149 0.1778 0.6496 0.6246 12 0.4440 0.3971 0.2076 0.8963 0.8043 0.8874 0.7885 0.8787 0.7730 0.8700 0.7579 0.8613 0.7430 13 0.7224 0.7014 0.6810 0.6611 0.6419 0.4970 0.4688 0.5847 0.5568 0.5303 0.5051 0.4810 0.6006 0.4150 0.3677 0.3875 0.3555 0.3262 0.2992 0.2745 0.3505 0.3173 0.3186 0.2858 0.2897 0.2575 0.2633 0.2320 0.2394 0.2090 0.2875 0.2607 0.2567 0.2307 0.2292 0.2042 0.2046 0.1807 0.1827 0.1599 0.1821 0.1869 0.1625 0.1413 0.1229 0.1954 0.1685 0.1452 0.1252 0.1079 0.1520 0.1299 0.1110 0.0949 0.1619 0.1372 0.1163 0.0985 0.0835 0.1476 0.1346 0.1240 0.1122 0.1042 0.0935 0.0876 0.0779 0.0736 0.0649 0.0859 0.0687 0.0550 0.0440 0.0352 14 0.5775 0.3405 0.1597 0.4423 0.4173 0.3878 0.3624 15 0.5553 0.3152 0.1401 16 0.6232 0.5339 0.4581 0.3936 0.2919 0.1229 0.1069 0.0708 0.0281 17 0.4363 0.2703 0.1078 0.0225 0.5134 0.4936 0.8528 0.7284 0.8444 0.7142 0.8360 0.7002 0.8277 0.6864 0.8195 0.6730 0.3714 0.3503 18 0.3387 0.3166 0.2959 0.2765 0.2584 0.0930 0.0802 0.0691 0.0929 0.0808 0.4155 0.2519 0.2176 0.1883 0.1631 0.2311 0.1978 0.1696 0.1456 0.2120 0.1799 0.1528 0.1300 0.1945 0.1635 0.1377 0.1161 0.1784 0.1486 0.1240 0.1037 0.1415 0.1252 0.1108 0.0981 0.0868 0.0600 0.0508 0.6050 0.5874 0.5703 0.5537 0.0946 0.0811 0.0693 0.0592 0.0506 0.0433 0.0180 0.0618 0.0541 0.0520 0.0451 0.0437 0.0376 0.0367 0.0313 0.0308 0.0261 0.2502 0.2317 0.2145 19 0.4746 0.3957 0.3305 0.0703 0.0596 0.0829 0.0728 0.0431 0.0365 0.0144 0.0115 20 0.4564 0.3769 0.3118 0.0611 0.0514 25 0.1842 0.0245 30 0.1314 0.7798 0.6095 0.4776 0.3751 0.7419 0.5521 0.4120 0.3083 0.6717 0.4529 0.3066 0.2083 0.6080 0.3715 0.2281 0.1407 0.5504 0.3048 0.1697 0.0951 0.2953 0.2314 0.1420 0.0872 0.2330 0.1741 0.0972 0.1460 0.0994 0.0460 0.0213 0.0099 0.1160 0.0923 0.0736 0.0588 0.0471 0.0754 0.0573 0.0437 0.0334 0.0256 0.0318 0.0221 0.0154 0.0107 0.0075 0.0134 0.0085 0.0054 0.0035 0.0022 0.0057 0.0033 0.0019 0.0011 0.0007 0.0304 0.015 0.0037 0.0009 0.0378 0.0196 0.0053 0.0014 0.0004 40 0.0197 0.0090 0.0019 0.0004 0.0160 0.0070 0.0013 0.0003 0.0129 0.0105 0.0054 0.0042 0.0010 0.0007 0.0002 0.0001 0.0038 0.0012 0.0001 0.0116 0.0026 0.0006 0.0001 0.0668 0.0339 0.0173 50 0.0543 60 0.0535 0.0303 0.0002 0.0001 APPENDIX 2 Present value of a regular annuity of R1 per period for n periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% Number of Periods 1 0.9709 0.9524 0.9346 0.9259 0.9901 1.9704 2.9410 2 3 0.9804 1.9416 2.8839 1.8080 1.9135 2.8286 1.7833 0.9615 1.8861 2.7751 3.6299 4.4518 0.9434 1.8334 2.6730 3.4651 4.2124 2.6243 1.8594 2.7232 3.5460 4.3295 2.5771 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 2.5313 2.4869 2.4437 2.4018 2.36122.3216 3.2397 3.1699 3.1024 3.0373 2.9745 2.9745 2.9137 3.8897 3.7908 3.6959 3.6048 3.5172 3.4331 0.8696 0.8621 0.8547 1.6257 1.6052 1.5852 2.28322.2459 2.2096 2.8550 2.7982 2.7432 3.3522 3.2743 3.1993 0.84750.8403 0.8333 1.5656 | 15465 1.5278 2.1743 2.1399 2.1065 2.6901 2.6386 2.5887 3.1272 3.0576 2.9906 4 5 3.9020 4.8534 3.8077 4.7135 3.7171 4.5797 3.3872 4.1002 3.3121 3.9927 6 5.7955 5.6014 5.2421 5.0757 3.6847 5.7864 6.4632 7 8 9 10 5.4172 6.2303 7.0197 7.7861 8.5302 4.7665 5.3893 5.9713 6.7282 7.6517 8.5660 9.4713 6.4720 7.3255 8.1622 8.9826 4.9173 5.5824 6.2098 6.8017 7.3601 6.0021 6.7327 7.4353 8.1109 4.6229 5.2064 5.7466 6.2469 6.7101 4.4859 4.3553 4.2305 4.1114 5.0330 4.8684 4.7122 4.5638 5.5348 5.33495.1461 4.9676 5.9952 5.7590 5.5370 5.3282 6.4177 6.1446 5.8892 5.6502 3.9975 3.8887 4.4226 4.2883 4.7988 4.6389 5.1317 4.9464 5.4262 5.2161 3.7845 4.1604 4.4873 4.7716 5.0188 4.0386 4.3436 4.6065 4.8332 3.5892 3.4976 3.4098 3.3255 3.9224 3.8115 3.7057 3.6046 4.2072 4.0776 3.9544 3.8372 4.4506 4.3038 4.1633 4.0310 4.6586 4.4941 4.3389 4.1925 7.1078 7.7217 6.5152 7.0236 11 7.8869 7.4987 12 13 10.3676 11.2551 12.1337 13.0037 13.8651 9.7868 9.2526 8.7605 8.3064 10.5753 9.9540 9.3851 8.8633 11.3484 10.6350 9.9856 9.3936 12.1062 11.2961 10.5631 9.8986 12.8493 11.9379 11.1184 10.3797 7.1390 7.5361 7.9038 8.3838 8.8527 9.2950 9.7122 7.9427 8.3577 8.7455 9.1079 6.8052 6.4951 7.1607 6.8137 7.4869 7.1034 7.78627.3667 8.0607 7.6061 6.2065 5.9377 6.49246.1944 6.74996.4235 6.98196.6282 7.19096.8109 5.6869 5.45275.2337 5.2337 5.0286 4.8364 4.6560 4.4865 4.3271 5.9176 5.6603 5.4206 5.1971 4.9884 4.7932 4.6105 4.4392 6.1218 5.8424 5.5831 5.3423 5.11834.90954.7147 4.5327 6.3025 6.0021 5.72455.4675 5.72455.46755.2293 5.22935.0081 4.8023 4.6106 6.4624 6.1422 6.1422 5.8474 5.5755 5.3242 5.0916 4.8759 4.6755 14 15 8.2442 8.5595 16 13.5777 12.5611 11.6523 14.7179 15.5623 16.3983 14.2919 17 18 13.1661 12.1657 12.6593 10.8378 10.1059 11.2741 10.4773 11.6896 10.8276 12.0853 11.1581 12.4622 11.4699 9.4466 9.7632 10.0591 10.3356 10.5940 14.9920 13.7535 15.6785 14.3238 13.1339 16.3514 14.8775 13.5903 8.8514 9.1216 9.3719 9.6036 9.8181 8.3126 7.8237 7.3792 8.5436 8.0216 7.5488 8.7556 8.2014 7.7016 8.9501 8.3649 7.8393 9.1285 8.5136 7.9633 6.9740 6.6039 6.2651 5.9542 5.6685 7.1196 6.7291 6.3729 6.0472 5.7487 7.2497 6.8399 6.46746.1280 5.8178 7.3658 6.9380 6.5504 6.1982 5.8775 7.4694 7.02486.6231 6.2593 5.9288 5.4053 5.1624 4.9377 5.4746 5.2223 4.9897 5.5339 5.2732 5.0333 5.5845 5.3162 5.0700 5.6278 5.3527 5.3527 5.1009 4.7296 4.7746 4.8122 4.8435 4.8696 19 20 17.2260 18.0456 25 30 40 22.0232 19.523517.413115.6221 14.0939 25.8077 22.3965 19.6004 17.2920 15.3725 32.834727.3555 23.1148 19.7928 17.1591 39.1961 31.4236 25.7298 21.4822 18.2559 44.9550 34.7609 27.675622.6235 18.9293 12.7834 11.6536 10.6748 13.7648 12.4090 11.2578 15.046313.3317 11.9246 15.7619 13.8007 | 12.2335 16.1614 14.0392 12.3766 9.8226 9.0770 8.4217 7.8431 10.2737 9.4269 8.6938 8.0552 10.7574 9.7791 8.9511 8.2438 10.9617 9.9148 9.0417 8.3045 11.0480 9.96729.0736 8.3240 7.33006.8729 6.4641 7.4957 7.0027 6.5660 7.6344 7.1050 6.6418 7.6752 7.1327 6.6605 7.6873 7.1401 6.6651 6.0971 57662546695 19514 9476 6.1772 5.8294 5.51685.2347 4.9789 6.2335 5.8713 5.5482 5.25824.9966 6.2463 5.8801 5.5541 5.2623 4.9995 6.2402 5.8819 5.5553 5.2630 4.9999 50 60
