The CFO has evaluated the three projects and came up with projections given below as follows:

Net cashflows $($R$000)$

Years

Project $012345678$

A $-350100110104112138160180-$

B $-35040100210260160---$

C $-35020015024040----$

The CFO would like to use the payback method and the accounting rate of return $($ARR$)$ to appraise the projects. He is not very familiar with the use of the NPV appraisal method. He believes the NPV method has major drawbacks and is not suitable in this case. He personally favours projects that show large accounting profits and payback invested funds early in their lives. Chakuma$$s cost of capital is $20$ per cent.

Required:

a$)$ What is the payback period for each project? $(5$ marks$)$

b$)$ What is the accounting rate of return for each project? $(8$ marks$)$

c$)$ Explain the meaning of NPV and outline the major advantages and disadvantages of this method. $(5$ marks$)$

d$)$ What are the limitations of using the CAPM for capital budgeting decisions? $(5$ marks$)$