QUESTION 5. 5.1 REQUIRED Study the information given below and calculate the Net Present Value. (5 marks) INFORMATION Richmond Limited is considering the purchase of a machine. The machine will cost R1 200 000 plus installation costs of R250 000 and it is expected to have a useful life of five years. The machine is expected to generate cash flows of R560 000 per year and is also expected to have a salvage value of R50 000. Annual cash outflows are expected to amount to R200 000. The company desires a minimum required rate of return of 12%. 5.2 REQUIRED Use the information given below to calculate the following: 5.2.1 Payback Period of Project B (answer expressed in years, months and days). (3 marks) 5.2.2 Accounting Rate of Return (on average investment) of Project A (answer expressed to two decimal places). (4 marks) 5.2.3 Benefit Cost Ratio of Project A (answer expressed to three decimal places). (4 marks) 5.2.4 Internal Rate of Return of Project B (answer expressed to two decimal places). (4 marks) INFORMATION The following data relate to two investment projects, only one of which may be selected: Project A Project B R R Initial capital expenditure 400 000 400 000 Cost of capital 15% 15% Net cash flows per year: Year 1 200 000 134 000 Year 2 140 000 134 000 Year 3 120 000 134 000 Year 4 72 000 134 000 Expected resale value at end of year 4 (not included in the figures above) 40 000 0 Average annual profit 43 000 34 000