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REQUIRED 3.1 Calculate the Payback Period of Machine A (answer expressed in years, months and days) (3 marks) 3.2 Calculate the Accounting Rate of Return
REQUIRED 3.1 Calculate the Payback Period of Machine A (answer expressed in years, months and days) (3 marks) 3.2 Calculate the Accounting Rate of Return on average investment of Machine B (answer expressed to two decimal places). (5 marks) 5 years INFORMATION Vierra Limited intends purchasing a new machine and has a choice between the following two machines: Machine A Machine B Initial cost R400 000 R400 000 Expected useful life 5 years Scrap value 0 0 Expected net cash flows: R R End of: Year 1 20 000 40 000 Year 2 30 000 40 000 Year 3 70 000 40 000 Year 4 60 000 40 000 Year 5 40 000 40 000 The company estimates that its cost of capital is 12%. Depreciation is calculated using the straight-line method
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