Use the information provided to answer the questions. 5.1 Use the information provided below to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. Calculate the Payback Period of Project A (expressed in years, months and days). 5.1.1 5.1.2 Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to two decimal places). 5.1.3 Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). 5.1.4 Use your answers from question 5.1.3 to recommend the project that should be chosen. Motivate your choice. INFORMATION Initial cost Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in one of them. You are given the following projected data: Scrap value Depreciation per year Net profit Year 1 Year 2 Year 3 Year 4 Year 5 Net cash flows Year 1 Year 2 Year 3 Year 4 Year 5 Additional information The discount rate used by the company is 12%. Project A R300 000 R40 000 R52 000 R20 000 R30 000 R50 000 R60 000 (3 marks) (5 marks) R10 000 (6 marks) (1 marks) Project B R300 000 0 R60 000 R90 000 R90 000 R90 000 R90 000 R90 000 5.2 Numbe d Periods 1 2 3 5 6 6 7 a 9 10 11 4 0.9670 9298 08885 08548 8227 0.792 07629 073600708404800 6567 06365 06:33 052 05718 05525 05337 0158 1487 4823 04396 14 15 16 Use the information provided below to calculate the Internal Rate of Return (expressed to two (5 marks) decimal places) using interpolation. INFORMATION 17 A machine with a purchase price of R1 200 000 is estimated to eliminate manual operations by R400 000 per year. The machine is expected to have a useful life of four years. 1% 20 APPENDIX 1: PRESENT VALUE OF R1 2% 3% 4% 5% 6% 7% 12% 13% 14% 10% 16% 17% 18% 19% 20% 0165804 05 09615 952 030 00 059 0974 01 59 9 08777 01 1854705303 X 8000 0.5813 0.9612 05425 09345 907003900 08:34 08573 0.5417 0.5254 681 16 07972 0.7831 0.7996 07561 074 07306 0.7182 27052 0944 5400 0.5706 5423 0915 086508009 0.3396 03100 0.793 0.7722 0.793 47312 87118 00801 0050 0257500400 00244 0.6080 15934 578 5720 25%9 0.9515 6.5057 08825 08:19 6.7835 0.7475 07:30 0580 0.54960:6209 4.5905 45874 0.5428 05154 04572 04751 0.4581 0.4371 24130 4019 4.3277 0.54208880 08375 0790067412 0.750 0.5653053120.590302545 53450500504800 04255 04322 24104 03 02704 1221 43349 12121 0.032768796 013 07:00 7107 0.965 08327 05835 0.541005132 14617 64623 04261 0.3800 03756 0353 0.3332 0.3130 12960 62791 0.2307 13 08797 7730 06811 060060530104688 04150 03677 0.3282 02867 2575 02292 0.2042 0182 0.8710 6.7579 661 0575 0505 0.4420 0.3878 03405 0.2962 0.2603 42300 42046 1807 015 0.025 0.2535 0.780407306668 027 05820 05400 5019053390409 03762 0380603060330500288 0280 12887 2251378 0914308368 0.7564 07625 16445 0.5919 05439 05002 0.4604 04241399 03608 0.329 03075 02843 02430 02434 0225 12090 935 1342 05083 08213044106156 08139035505683 04612 04224 0.5 0.72945 025 02472 0225 020 01911 1.1796 07651374 0896308043 07224 06456 05647 0.5256 04751 0429 0.587 0.3505 43133 02875 02607 02366 02149 01954 1778 0.1019 11476 1340 40859 0.884 6.7885 0.7011 0634805588 0.0004440 030 0.3666 031864.2868 82567 02307 02079 080 016 0152 0.372 11210 122007 08:36.7430 06413 05553 04610 04173 03624 03152 0.2742 0.2284 4.2060016270.1999 0140 0:1225 01079 00945 0.0635 1.6736 00049 4:0352 0162501452 0124 063 11042 00935 00550 01413 01252 011 0.2985 086 08779 00640 0.853867294 0232 051390458 0.3636 03387 02915 0.2510 02176 1883 01631 01415 01229 0106900930 00811 0.2708 10818 0541 00281 08444 67112 06060 051364 0.375 03166 0270002311 0981606145801252003069000600 1050005100225 18 02380 0.7002 0.587404935 4155 0.360002959 0252 0.2120 0.1799 1525 1300 1108 00943 0 1391 052 1.0506104170037600180 08115 0.6730 05537 0466463760 03118 02684 02145 01754 01488 240 00 00 0029 0.10 0.8277 0.0004 0.5700 04:43 0395703306 02765 02317 0.1945 0100543771101 0.0961 0029 0300 00 00306 05431 3037 031340144 an 05400000 nm nas am 03611305140043005100800261 00115 0.7798 0.6095 04778 035 62963 02:30 01842 01480 016 00523 60736 005880047100073 0030400245 00197 0160 101290010500038 3007419 5821 014121 38 214 114 012140540054 053 047 046 QUIS OUTST TEE 10054 U42 UTZ 40 04671764529 03066 02060 1420 0.0572 0.0008 30460 0.031 0.0221 50 0.6080 4.3715 0.22 0.1447 0672 00543 0.0026 20213 0.0134 0.0005 2004 20006 0.0022 0.001400000 2000 1.0004 0.0003 10002 00001 015440107 0075 00053 00037 2002 20015 0.0013 10010 0000 40001 ma Number d Periode 1 2 2 4 5 6 7 A 9 10 11 12 13 14 16 17 18 10 20 25 30 40 50 APPENDIX 2: PRESENT VALUE OF A REGULAR ANNUITY OF R1 PER PERIOD FOR N PERIODS 1% 5% 65 29410 238302256 2.7761 27232 7% 0900109804 3.0706 09615 0961 1:9034 09316 09259 0917 0900100000 08500 CRISE 08772 0880608621 0547 08475 05001 1.9704 1.3416 1913 1.880 1894 1834 18080 17833 1.7991 1.7305 1.7125 1.0801 1681 16467 15257 18052 1.3852 1.000 1.500 1.275 3.9020 38017 1.7171 36290 15400 14851 3387233121 7.8617 7:3255 70100 2.6730 28243 25771 25313 24869 24437 24018 23612 23216 2230 22450 22096 21743 21000 21005 17% 35 19% 20% 48634 47115 45790 44518 43395 42124 41002 39517 3.8897 1.7908 36969 16048 35172 34331 33522 32743 31993 31212 30575 2.9906 57955 5:0014 54172 52421 50757 49173 47005 40229 4.429 43553 4.2305 41114 39975 38887 3.7645 30847 33892 34916 34099 3.1255 61262 64720 62300 6.000 57864 5.524 53813 52064 5.0000 48684 4.7122 4563844226 42883 41604 40386 310224 33115 37057 3.6046 3.2397 11899 3102420073 29745 29137 23550 27982 23432 26801 24386 2.5867 6.732764632 1.2006 63713 57486 5.1348 53340 51461 49676 47 48380 44875 43436 42072 40716 31544 38372 8.5860 81622 1.3861 74363 7.1078 1817 65152 62489 5.9952 57590 5.5370 5.3282 51317 494 47716 48065 4.4506 43038 41633 40310 11.2561 105753 9064093851 88633383879427 75381 94713 89836 8530081109 7.7217 1.3601 70216 67101 6417761466 58890 56802 5463 52161 50188 48312 48686 44941 43389 4:1935 12.133 11.3484 10.635 9.586693536 18627 83577 10.3676 9.7868 3.2524 8.7605 3064 18869 74987 7.1390 6.8062 6.4951 62065 59077 5.6868 54527 52337 50286 43364 46660 4.4866 4.3271 7.1807 6.8137 64601 6.1964 59176 58600 54006 51971 488 47912 4105 44962 13.0037 121062 11.2961 10.5631 58986 1.2850 87455 82442 7.7862 1.3867 69819 66282 6.3125 60021 57245 5.4675 52295 50081 4.8025 4.5106 17:2260 156786 142238 131339 12.0653 11.1581 103356 79038 7480 1.3034 5.7499 64235 1218 58424 5583153423 5.1188 49095 47147 4.537 13.8051 12.5483 11.9375 11.1184 103797 17:22 91019 85595 8.00807 18001 7.1909 68109 64324 61422 58474 55755 52242 50916 48799 4.5715 18.0450 16.3514 14.8775 13.000 124622 114000 103940 14.7179 135777125611 11.8623 108376 11059 94466 88514 8.3126 18237 73790 69740 66039 62651 53542 56686 54053 51634 49377 4.7296 15.5623 14:2919 13.1661 12.1667 112141 11477397612 97612 91216 5.5435 80216 75488 1.1996 47291 63729 63472 57437 5.4746 52223 49097 4.7746 16.3983 14.9920 13.753 12.0563 11696 16.8276 100581 93719 870068.2014 7.7015 12497 0899 64674 61250 58178 55339 52712 56333 48122 96036 89601 83849 78301 736058 698 65504 6.1982 58775 5.5845 53162 54700 4.3435 9813192956513679633 91285 45130 7.9830 7.4804 7.0248 66231 6.2580 5.9288 5.279 536275100948090 22.1222 19:5215 17.4131 15.6221 14.0630 12.7834 119506 106748 9226 9.0770 84217 7.8431 7.3300 68729 6.4041 60071 5.706254040 5951 49476 25.5077 22.3915 19.0004 17.2925 15.3125 12.7548 124090 153125 12.7548 124090 112578 10.2737 9.4209 3.0908 8.0552 7.4957 7.0027 65060 61772 51254 55168 5.2347 4.5769 12137 27.355 23114 19.7508 17. 1691 16 0663 133317 116086 10.7574 97791 89611 8238 76344 7105068418 62306 58713 55012 5.2582 4.9066 30.1961 31.4296 257296 21 4822 18:2550 15.7619 13.8007 122305 10.9617 99148 90417 8.3045 76752 71327 68606 62463 58801 55541 5.2623 49095 44.9650 34.7609 276756 224295 189098 18.1614 141392 123796 110480 49672 90736 8.3240 76873 71401 68851 62412 5.3819 55683 52630 4.9999