See Organic Farms purchased a new tractor at a cost of R 80 000. Annual operating cash inflows are expected to be R 30 000 each year for four years. At the end of the tractors useful life, the salvage value of the tractor is expected to be R 5 000.

Required:

1.2 Calculate the Net Present Value if the Cost of Capital is 12 % (ignore taxes) On the basis of this calculation should this project be accepted? Why / why not? (10)

1.3 Discuss advantages and disadvantages of the Payback Period? (6)

1.4 Discuss the 4 steps in the Capital Budgeting Process (8)