QUESTION THREE: CAPITAL INVESTMENT APPRAISAL [25 MARKS] H&K Ltd is considering investing in a project with an initial cost of R1 250 000. The expected relevant revenues and costs of this project are as follows:

YEAR	REVENUE	COST
1	675 000	300 000
2	625 000	200 000
3	700 000	100 000
4	600 000	100 000
5	400 000	100 000

This schedule includes all cash inflows and outflows from the project. The estimated cost of capital is 15%.

REQUIRED: 3.1 Compute the net present value of the project and comment on whether the project should be accepted or rejected. (12 marks)

3.2 If H&K Ltd has a cut off period of 3 years on all project, should this project be accepted or rejected? Support your answer with relevant calculations (calculate the payback period) (4 marks)

3.3 Calculate the accounting rate of return and state why it is more preferred than payback method. (5 marks)

3.4 Calculate the discounted payback period (4 marks)