The management of Ota Industries has to choose between two machines, namely machine CT and machine DT. The following information is presented to you: Machine CT Machine DT Initial investments R400 000 R480 000 Net cash inflows:

Year R R 1 120 000 170 000 2 120 000 120 000 3 120 000 120 000 4 120 000 140 000 5 120 000 110 000 The required return is 15%. The straight line method of depreciation is in use. Discount factors are as follows: Year Discount Factor 1 2 3 4 5 0.8696 0.7561 0.6575 0.5718 0.4972

Required:

4.1.1 Calculate the payback period for Machine DT (years, months and days).

4.1.2 Calculate the Net Present Value (NPV) for each machine. (round off amounts to the nearest Rand.)

4.1.3 Advise management based on your answer in (4.1.2) above.

4.2 Discuss four (4) objectives of financial management.