QUESTION TWO (20 Marks) REQUIRED Study the information provided below and answer the following questions: 2.1 Calculate the Payback period of both projects (answers expressed in years, months and days.) Which project would you choose on the basis of payback period? Why? (6 marks) 2.2 Calculate the Accounting Rate of Return for both projects (answer expressed to two decimal places). (6 marks) 2.3 Calculate the Net Present Value for both projects. (Round off amounts to the nearest (6 marks) Rand.) Based on your calculations from 21-23, which project should Rothmans Limited choose? (2 marks) Why? 2.4 Project B INFORMATION The following information relates to two projects under consideration by Rothmans Limited Project A Initial cost R1 555 000 Expected life Expected scrap value 0 Expected net cash flows: R R1 550 000 7 years 7 years 0 R End of year 1 450 000 420 000 420 000 420 000 420 000 4 400 000 200 000 180 000 420 000 5 420 000 6 350 000 420 000 7 450 000 420 000 The company estimates that its cost of capital is 13%