Read the case study and answer the questions that follow; ORBIT LIMITED: FINANCIAL PERFORMANCE AND FORECASTING The mission of Orbit Limited is to achieve its vision by providing an innovative product and creative cusfomer experiences. It's talented staff are guided by the values, social conscience and customer-centric mindset espoused by the board of directors. At the core of Orbit Limited is its customers. The company is committed to successful growth by delivering excellent service to its customers to whom it offers quality and value. It is for these reasons that Orbit Limited was able to achieve success in the marketplace. However, the management has identified the need to improve in certain respects. The following are the financial statements for the past two years: In addition to the above, the following information is available: All sales and purchases of imventory are on credit. Inventones on 31 December 2020 amounted to R1 500000 . Gredt terms of 5/10 net 90 days are granted by creditors. Credit terms of 60 days are granted to deblors. Dividends dectared for the years ended 31 December 2021 and 2022 amounted to R1 169280 and R1 422,000 respectively. The financal manager of Ortit Limited provided the following forecasts for 2023: Salos are estmated at 8000 units with a selling price of R1 800 each. The manufacturing costs include direct materials of RA60 per unit, direct labour of R315 per unit, vanable overheads of R170 per unit and fixed overheads of R 880000 . Foxed seling and administration costs are estimated at R2 000000 and the variable seling costs are estimaled io be 7.5% of sales: The drectors are contemplating diversification in 2024 by entering the passenger transport market. This could be achieved through the purchase of a fleet of midi buses that are expected bo cost R9 500000 . An additional R500 000 will be spent on import dubes. The cost of operaling the buses each year is expected to be R4 100.000 and the annual revenues trom transporting the passengers are estmated at R7 000000 The buses are expected to have a total salvage value of R1000000 and the estimated useful life of the buses is five years. The company's cost of capital is expected to reduce to 15%. Depreciation is calculated using the straight-line method. REQUIRED Refer to the planned diversification for 2024 and calculate the following: 4.1 Payback Period (expressed in years, months and days) 4.2 Accounting Rate of Return on initial investment (expressed to two decimal places) ( 3 marks) 4,3 Net Present Value ( 5 marks) 4.4 Internal Rate of Return using interpolation (expressed to two decimal places). ( 6 marks) 4.5. Internal Rate of Return using interpolation (expressed to two decimal places) if there ( 6 marks) were no import duties and no salvage value. (5 marks) Read the case study and answer the questions that follow; ORBIT LIMITED: FINANCIAL PERFORMANCE AND FORECASTING The mission of Orbit Limited is to achieve its vision by providing an innovative product and creative cusfomer experiences. It's talented staff are guided by the values, social conscience and customer-centric mindset espoused by the board of directors. At the core of Orbit Limited is its customers. The company is committed to successful growth by delivering excellent service to its customers to whom it offers quality and value. It is for these reasons that Orbit Limited was able to achieve success in the marketplace. However, the management has identified the need to improve in certain respects. The following are the financial statements for the past two years: In addition to the above, the following information is available: All sales and purchases of imventory are on credit. Inventones on 31 December 2020 amounted to R1 500000 . Gredt terms of 5/10 net 90 days are granted by creditors. Credit terms of 60 days are granted to deblors. Dividends dectared for the years ended 31 December 2021 and 2022 amounted to R1 169280 and R1 422,000 respectively. The financal manager of Ortit Limited provided the following forecasts for 2023: Salos are estmated at 8000 units with a selling price of R1 800 each. The manufacturing costs include direct materials of RA60 per unit, direct labour of R315 per unit, vanable overheads of R170 per unit and fixed overheads of R 880000 . Foxed seling and administration costs are estimated at R2 000000 and the variable seling costs are estimaled io be 7.5% of sales: The drectors are contemplating diversification in 2024 by entering the passenger transport market. This could be achieved through the purchase of a fleet of midi buses that are expected bo cost R9 500000 . An additional R500 000 will be spent on import dubes. The cost of operaling the buses each year is expected to be R4 100.000 and the annual revenues trom transporting the passengers are estmated at R7 000000 The buses are expected to have a total salvage value of R1000000 and the estimated useful life of the buses is five years. The company's cost of capital is expected to reduce to 15%. Depreciation is calculated using the straight-line method. REQUIRED Refer to the planned diversification for 2024 and calculate the following: 4.1 Payback Period (expressed in years, months and days) 4.2 Accounting Rate of Return on initial investment (expressed to two decimal places) ( 3 marks) 4,3 Net Present Value ( 5 marks) 4.4 Internal Rate of Return using interpolation (expressed to two decimal places). ( 6 marks) 4.5. Internal Rate of Return using interpolation (expressed to two decimal places) if there ( 6 marks) were no import duties and no salvage value
