SECTION B Attempt only TWO C.questions from this section QUESTION 1 EloMax Company Ltd has carried out some research that shows that the business could provide a standard service that it has recently developed. Provision of the service would the service would take place throughout the next five years. At the end of that time, it is require investment in a machine that would cost GH 100,000, payable immediately. Sales of estimated that the machine could be sold for GH$20,000. Intlows and outflows from sales of the service would be expected to be as follows: GHE000 Time Immediately 1 years time 2 years' time 3 years time 4 years' time 5 years' time 5 years' time Cost of machine Operating profit before depreciation Operating profit before depreciation Operating profit before depreciation Operating profit before depreciation Operating profit before depreciation Disposal proceeds from the machine (100) 20 40 50 60 20 20 EloMax Ltd has acceptable payback period of 3 years and expected returns on investment of 45%. It also uses straight-line method to depreciate fixed assets. 1. Advise the company whether or not to undertako the investment using the following appraisal techniques: i. Accounting Rate of Return (ARR) 3marks] ii. Payback Period (PBP) 13marks) iii. Net Present Value (NPV). Assume a discount rate of 10% per annum |4marks] a. Discuss Three (3) advantages of Net Present Valuation method. [3 marks] b. State two (2) disadvantages of the payback method of valuing investment. (3 marks] [Total marks 15)