QUESTION 5.2 Read the information below and answer the following questions

5.2 Net Present Value of Project Tan. (4 marks)

INFORMATION The management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each of which requires an initial investment of R2 500 000. The following information is presented to you:

5.2 Net Present Value of Project Tan. (4 marks)

APPENDIX 1: PRESENT VALUE OF R1

APPENDIX 2 : PRESENT VALUE OF A REGULAR ANNUITY OF R1 PER PERIOD FOR N PERIODS

Year 1 2 3 5 PROJECT COS Net Profit R 130 000 130 000 130 000 130 000 130 000 PROJECT TAN Net Profit R 80 000 180 000 120 000 220 000 50 000 A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method. Number of Periods 1 2 3 4 5 6 7 8 9 10 11 12 1% 2% 3% st 0.9901 0.9804 0.9709 4% 0.9706 0.9423 0.9151 0.8890 0.8638 0.9235 0.9615 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 5% 0.9143 0.8368 0.7664 0.9624 0.9434 0.9346 0.8963 0.8043 0.7224 6% 0.8535 0.7894 0.7307 0.6768 15 0.8613 7% 0.7430 0.8396 0.8163 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.6496 0.5847 8% 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6587 0.9259 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.6274 0.5820 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 9% 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.4817 0.9174 0.8874 0.7885 0.7014 0.6246 0.5568 0.4970 0.4440 10% 0.9091 11% 0.9009 0.7938 0.7722 0.7513 0.7312 0.8573 0.8417 0.8264 0.8116 0.7972 0.8700 0.7579 0.6611 0.5775 0.5051 0.4423 0.3878 0.3405 0.5403 0.5019 0.4665 0.4339 0.5268 0.4751 0.4289 0.3875 0.3505 0.3173 12% 13% 14% 15% 16% 17% 18% 19% 20% 0.8929 0.3971 0.3555 0.3186 0.2858 0.7118 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 0.3606 0.5083 0.4632 0.4224 0.3855 0.3522 0.3220 0.5674 0.5428 0.5194 0.4039 0.6355 0.6133 0.5921 0.5718 0.5523 0.5337 0.5158 0.4987 0.5066 0.4803 0.4556 13 0.8787 0.7730 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 0.2997 0.2575 0.2292 0.8850 0.8772 0.8696 0.2992 0.2633 0.2320 0.2046 0.8621 0.8547 0.7831 0.7695 0.7561 0.7432 0.7305 0.7182 0.7062 0.6944 0.6400 0.4523 0.4251 0.3996 0.3759 0.3538 0.3332 0.3139 0.2959 0.6419 0.5553 0.4810 0.4173 0.3624 0.3152 0.2745 0.2394 0.2090 0.1827 0.6931 0.6750 0.6575 0.6407 0.6244 0.6086 0.5934 0.5787 0.5120 0.8475 0.8403 0.4323 0.4972 0.4761 0.4561 0.4371 0.4190 0.2946 0.2697 0.4104 0.3898 0.3704 0.3521 0.2567 0.2307 0.2076 0.1869 0.1685 0.1520 0.2472 0.2267 0.2080 0.1911 0.3762 0.3506 0.3269 0.3050 0.2848 0.2660 0.2487 0.2326 0.2042 0.1821 0.1625 0.1452 0.1299 0.3329 0.3075 0.2843 0.2630 0.2434 0.2255 0.2090 0.1938 0.1372 0.8333 0.8000 0.1163 0.1807 0.1597 0.1413 0.1252 01110 0.0985 0.4823 0.2875 0.2607 0.2366 0.2149 0.1954 0.1778 0.1619 0.1476 0.1346 0.0859 25% 0.4019 0.3277 0.0876 0.3349 0.2621 | 0.2791 0.2097 0.4096 0.1756 0.1615 0.1074 0.1678 0.1240 0.1122 0.0687 0.0779 0.1342 0.1042 0.0935 0.0550 0.1599 0.1401 0.1229 0.1079 0.0949 0.0835 0.0736 0.0649 0.0440 0.0352 16 17 18 19 20 25 30 40 50 60 0.8528 0.7284 0.6232 0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.8444 0.7142 0.6050 0.5134 0.8360 0.7002 0.5874 0.4936 0.4155 0.4363 0.3714 0.3166 0.2703 0.2311 0.8277 0.6864 0.5703 0.4746 0.3967 0.7798 0.6095 0.4776 0.3751 0.2953 0.6717 0.4529 0.8195 0.6730 0.5537 0.4564 0.3769 0.3118 0.2584 0.6080 0.3715 0.3503 0.3066 0.2083 0.1420 0.2281 0.1407 0.0872 0.2959 0.2502 0.7419 0.5521 0.4120 0.3083 0.2314 0.1741 0.1314 0.0994 0.0754 0.2330 0.1842 0.1460 0.3305 0.2765 0.2317 0.1945 0.1635 0.0543 0.2120 0.5504 0,3048 0.1697 0.0951 0.0535 0.0303 0.2145 0.1784 0.0972 0.0668 0.0460 0.0318 0.0339 0.1160 0.0213 0.0134 0.2176 0.1883 0.1631 0.1415 0.1229 0.0173 0.0099 0.0057 0.1978 0.1799 0.0923 0.0573 0.1486 0.1240 0.0221 0.1696 0.0085 0.1377 0.1456 0.1252 0.1078 0.1528 0.1300 0.1108 0.0946 0.0808 0.0691 0.0592 0.0508 0.0437 0.0376 0.0180 0.1161 0.0981 0.1037 0.0868 0.0736 0.0588 0.0471 0.0437 0.0334 0.0154 0.0107 0.0054 0.0035 0.0256 0.0728 0.0378 0.1069 0.0930 0.0811 0.0708 0.0618 0.0541 0.0281 0.0829 0.0703 0.0596 0.0506 0.0431 0.0367 0.0929 0.0802 0.0693 0.0600 0.0022 0.0014 0.0033 0.0019 0.0011 0.0007 0.0004 0.0611 0.0514 0.0433 0.0196 0.0151 0.0116 0.0304 0.0245 0.0075 0.0053 0.0037 0.0025 0.0009 0.0006 0.0520 0.0451 0.0225 0.0365 0.0308 0.0004 0.0197 0.0160 0.0129 0.0105 0.0038 0.0002 0.0001 0.0001 0.0090 0.0070 0.0054 0.0042 0.0012 0.0313 0.0144 0.0019 0.0013 0.0010 0.0007 0.0001 0.0003 0.0261 0.0115 1 0.0002 0.0001 Number Periods 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1% 2% 0.9901 0.9804 0.9709 0.9615 0.9524 4.8534 4.7135 4.5797 6.7282 3% 1.9704 1.9416 1.9135 1.8861 1.8594 1.8334 7.6517 9.4713 29410 2.8839 2.8286 2.7751 2.7232 2.6730 26243 4% 8.9826 11.2551 10.5753 6.4720 6.2303 6.0021 5.7864 5.5824 10.3676 9.7868 9.2526 12.1337 11.3484 7.3255 7.0197 6.7327 6.4632 6.2098 8.5660 8.1622 7.7861 7.4353 7.1078 6.8017 8.5302 3.9020 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 5% 9.9640 5.7965 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 10.6350 4.4518 4.3295 42124 8.1109 6% 8.7605 0.9434 9.3851 9.9856 13.0037 12.1062 11.2961 10.5631 7.7217 7.3601 8.8633 7% 9.3936 9.8986 1.8080 0.9346 0.9259 0.9174 0.9091 4.1002 8.3064 7.8869 7.4987 8% 7.0236 5.3893 5.2064 25771 5.9713 5.7466 8.3838 7.9427 8.8527 8.35/7 13.8651 12.8493 11.9379 11.1184 10.3797 9.7122 9.1079 2 10% 11% 3.9927 3.8897 3.7908 1.7833 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 1.6257 1.6052 1.5852 1.5656 1.5465 1.5278 7.1390 7.5361 2.5313 2.4869 24437 2.4018 23612 2.3216 6.5152 6.2469 5.9952 5.7590 5.5370 0.9009 0.8929 0.8850 0.8772 0.8696 0.8621 4.4859 4.3553 4.2305 4.1114 5.0330 4.8684 4.7122 3.1024 3.0373 6.7101 6.4177 6.1446 5.8892 12% 13% 14% 15% 16% 17% 18% 3.6969 3.6048 5.5348 5.3349 5.1461 4.9676 7.9038 7.4869 7.1034 9.2950 8.7455 8.2442 7.7862 7.3667 6.8052 6.4951 6.2065 7.1607 6.8137 6.4924 8.5595 8.0607 7.6061 4.5638 5.3282 2.9745 2.9137 3.9975 3.5172 3.4331 3.3522 3.2743 3.1993 4.4226 4.2883 7.1909 6.8109 5.1317 4.9464 6.1944 5.9176 4.7988 4.6389 4.4873 6.7499 6.4235 6.1218 6.9819 6.6282 6.3025 2.2832 2.2459 2.2096 21743 21399 2.1065 3.8887 3.7845 3.6847 3.5892 3.4976 6.4624 2.8550 2.7982 27432 2.6901 2.6386 2.5887 4.1604 0.8547 0.8475 5.9377 5.6869 5.4527 5.2337 5.0286 4.8364 4.6560 5.6502 5.4262 5.2161 5.0188 4.8332 4.6586 4.4941 4.3389 19% 20% 5.6603 5.4206 5.1971 6.0021 5.7245 0.8403 0.8333 4.0386 3.9224 3.8115 3.7057 5.8424 5.5831 5.3423 4.3436 4.2072 4.0776 3.9544 4.7716 4.6065 4.4506 4.3038 4.1633 3.1272 3.0576 2.9906 5.4675 6.1422 5.8474 5.5755 3.4098 3.3255 4.9884 3.6046 3.8372 4.0310 4.1925 4.4865 4.3271 4.7932 4.6105 4.4392 5.1183 4.9095 4.7147 4.5327 5.2293 5.0081 4.8023 4.6106 5.3242 5.0916 4.8759 4.6755 16 17 18 19 20 25 30 40 14.7179 13.5777 12.5611 11.6523 10.8378 10.1059 8 15.5623 14.2919 13.1661 12.1657 112741 10.4773 16.3983 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 172260 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 22.0232 19.5235 17.4131 15.6221 14.0939 12.7834 11.6536 32.8347 27.3555 50 39.1961 31.4236 18.0456 16.3514 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 9.4466 8.8514 44.9550 34.7609 9.7632 9.1216 23.1148 19.7928 25.7298 21.4822 17.1591 15.0463 18.2559 15.7619 9.6036 10.6748 8.3125 7.8227 13.8007 12.2335 9.3719 8.7556 8.2014 7.7016 7.2497 6.8399 6.4674 6.1280 5.8178 5.5339 5.2732 5.0333 4.8122 27.6756 22.6235 18.9293 16.1614 14.0392 12.3766 8.9501 9.1285 25.8077 22.3965 19.6004 17.2920 15.3725 13.7648 124090 11.2578 10.2737 9.4269 8.6938 8.0552 9.8226 7.3792 8.5436 8.0216 7.5488 7.1196 6.7291 6.3729 6.0472 5.7487 5.4746 5.2223 4.9897 4.7746 8.3649 7.8393 8.5136 7.9633 13.3317 11.9246 10.7574 97791 6.9740 11.0480 9.9672 6.6039 6.2651 5.9542 8.9611 10.9617 9.9148 9.0417 9.0770 8.4217 7.8431 7.3300 6.8729 7.4694 7.0248 7.3658 6.9380 6.5504 6.1982 5.8775 5.5845 5.3162 5,0700 4.8435 5.6665 5.4053 5.1624 4.9377 4.7296 7.4967 7.0027 6.6231 6.2593 5.9288 5.6278 8.3045 7.6752 7.1327 8.2438 7.6344 7.1050 6.6418 6.2335 5.8713 6.4641 6.0971 5.7662 5.4669 5.1961 4.9476 6.5660 6.1772 5.8294 5.3527 5.1009 4.8696 5.5168 5.2347 4.9789 5.5482 5.2582 4.9966 6.6605 6.2463 5.8801 5.5541 5.2623 4.9995 9.0736 8.3240 7.6873 7.1401 6.6651 6.2402 5.8819 5.5553 5.2630 4.9999