Use the information provided below to answer the following questions:

5.1 Calculate the Payback Period of Machine B (expressed in years, months and days). (3 marks) 5.2 Calculate the Accounting Rate of Return (on average investment) of both machines (expressed to two decimal places). (6 marks) 5.3 Calculate the Net Present Value of each machine. (5 marks) 5.4 Which machine should be chosen if the time value of money is taken into account? Why? (1 marks) 5.5 Calculate the Internal Rate of Return of Machine B using interpolation (expressed to two decimal places), if the net cash flows are R140 000 per year for five years. (5 marks)

INFORMATION Salsa Limited intends purchasing a new machine and has a choice between two machines, of which only one can be chosen. The following information pertaining to the two machines is available: Machine A Machine B Initial cost R500 000 R500 000 Cost of capital 14% 14% Expected economic life 5 years 5 years Expected disposal value R50 000 0 Depreciation per year R90 000 R100 000 Expected net profit: Year 1 R50 000 R60 000 Year 2 R60 000 R60 000 Year 3 R70 000 R60 000 Year 4 R80 000 R60 000 Year 5 R20 000 R60 000