QUESTION 5 (20 MARKS) Note: Where discount factors are required, use only the present value tables (Appendix 1 and 2) that appear after the formula sheet. REQUIRED Study the information given below and answer the following questions: 5.1 Defermine the Net Present Values of the two investment alternafives. (Show the calculations of the present values as wel as the net present values.) (9 marks) 5.2 If both the net present values were negative, what advice would you offer Mustak Limited? (1 mark) 5.3 Calculate the Accounting Rate of Return on average investment of Option 2 (expressed to two decimal places). (5 marks) 5.4 Calculate the Internal Rate of Return (expressed to two decimal placas) of Option 1. Your answer must include two net present value calculafions (using consecutive rates/percentages) and interpolation. (5 marks) INFORMATION Mustek Limited is planning a new business venture. With R3 000000 available funds to invest, it is investigating two options: Option 1 is to acquire an exclusive contract to operate vending machinas in municipal offices in a city for four years. The contract requires the firm to pay the city R2 000000 cash at the beginning. A once off payment of R300000 is also required at the beginning for transportation and instalation. The firm expects cash revenues from the operation to be R1 800000 per year and cash expenses to be R1 000000 per year. Option 2 is to operate a printing shop in a busy shopping mall. This option would require the company to spend R2 700000 for printing equipment that has an estimaled useful life of four years, with a R400 000 salvage valua. The cash revenues are expected to be R2 600000 per year and cash expenses are expectad to be R1 700000 per year. Mustek Limited uses the straight-line method of depreciation. The company's cost of capital is 12%. END OF PAPER TOTAL: 100 MARKS QUESTION 5 (20 MARKS) Note: Where discount factors are required, use only the present value tables (Appendix 1 and 2) that appear after the formula sheet. REQUIRED Study the information given below and answer the following questions: 5.1 Defermine the Net Present Values of the two investment alternafives. (Show the calculations of the present values as wel as the net present values.) (9 marks) 5.2 If both the net present values were negative, what advice would you offer Mustak Limited? (1 mark) 5.3 Calculate the Accounting Rate of Return on average investment of Option 2 (expressed to two decimal places). (5 marks) 5.4 Calculate the Internal Rate of Return (expressed to two decimal placas) of Option 1. Your answer must include two net present value calculafions (using consecutive rates/percentages) and interpolation. (5 marks) INFORMATION Mustek Limited is planning a new business venture. With R3 000000 available funds to invest, it is investigating two options: Option 1 is to acquire an exclusive contract to operate vending machinas in municipal offices in a city for four years. The contract requires the firm to pay the city R2 000000 cash at the beginning. A once off payment of R300000 is also required at the beginning for transportation and instalation. The firm expects cash revenues from the operation to be R1 800000 per year and cash expenses to be R1 000000 per year. Option 2 is to operate a printing shop in a busy shopping mall. This option would require the company to spend R2 700000 for printing equipment that has an estimaled useful life of four years, with a R400 000 salvage valua. The cash revenues are expected to be R2 600000 per year and cash expenses are expectad to be R1 700000 per year. Mustek Limited uses the straight-line method of depreciation. The company's cost of capital is 12%. END OF PAPER TOTAL: 100 MARKS