The management of Nadia Investors has to make a choice between two projects: Project Intensive and Project Primary. Each project will require an initial investment of R2 500 000.

INFORMATION

Project Intensive Project Primary Net profits Net profits

Year R R

1 2

3

4 5

80 000 180 000

120 000

220 000 50 000

130 000 130 000

130 000

130 000 130 000

A scrap value of R100 000 is expected for Project Intensive. Depreciation is calculated on the straightline basis.

The required rate of return is 15%.

REQUIRED:

Use the information provided above to calculate the following:

3.1 Payback Period for Project Intensive (answer in years, months and days).

3.2 Calculate Accounting rate of return for Project Primary (answer in two decimal places). 3.3 Net Present Value for Project Intensive.

3.4 Internal Rate of Return for Project Primary using interpolation (answer in two decimal places.

(4 Marks) (4 Marks) (6 Marks)