TWO [22] Baker Ltd has a choice of two projects to invest in. The following details relate to these projects: Project Y R1700 000 Project Z R1600 000 6 years Investment required Expected economic lifetime Minimum required rate of return Net annual cash inflows 1st year 6 years 12% 12% R400 000 R430 000 2nd year R420 000 R430 000 3rd year R440 000 R430 000 4th year R580 000 R430 000 5th year R520 000 R430 000 6th R460 000 R430 000 year Required: 4.1 Use the net present value method to determine which project Baker Ltd should choose. Show all workings (17) 4.2 Justify why the net present value method (NPV) is favoured over the payback period. 65 REGENT BUSINESS SCHOOL (RBS) - JULY 2022 (5) BACHELOR OF COMMERCE YEAR 3 - ACADEMIC AND ASSESSMENT CALENDAR - DISTANCE Present value interest factor of R1 per period for n periods, PVIF (i,n) Period 12% 1 0.893 2 0.797 3 0.712 4 5 6 0.636 0.567 0.507 Present value interest factor of an annuity of R1 per period for n periods, PVIFA (i,n) QUESTION THREE Period 1 12% 0.893 2 1.690 3 2.402 4 3.037 5 3.505 6 4.111 "In Business there are always risks involved." 3.1 Discuss market and liquidity risks as categories of financial risk. 3.2 Describe how an entity may reduce its credit and liquidity risks ||| END OF ACCOUNTING 3: ASSIGNMENT 2 [13] (7) (6)