QUESTION 5

(20 Marks)

	REQUIRED
5.1	Calculate the Payback Period of Project G (expressed in years, months and days).						(3 marks)
5.2	Calculate the Accounting Rate of Return (on average investment) of Project F (expressed to two decimal places).						(5 marks)
5.3	Calculate the Net Present Value of Project F (with amounts rounded off to the nearest Rand).						(4 marks)
5.4	Calculate the Internal Rate of Return (IRR) of Project G (expressed to two decimal places).						(6 marks)
5.5	Comment on the IRR calculated above.						(2 marks)
	INFORMATION
	Nascar Limited has the option to invest in machinery in Projects F and G but finance is only available to invest in one of them. The following projected data is available:
			Project F	Project G
			R	R
	Initial cost		250 000	250 000
	Depreciation per year		50 000	50 000
	Net cash inflows:
		Year 1	70 000	82 000
		Year 2	75 000	82 000
		Year 3	82 000	82 000
		Year 4	85 000	82 000
		Year 5	90 000	82 000

	Additional information
1.	Project F is expected to have a scrap value of R20 000 (not included in the figures above). No scrap value is expected for Project G.
2.	The cost of capital is 15%.