Use the information provided to answer the questions.

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.

5.1.4 Use your answers from question 5.1.3 to recommend the project that should be chosen. Motivate your choice. (1)mark

INFORMATION 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: Initial cost Scrap value Depreciation per year Net profit Year 1 Year 2 Year 3 Year 4 Project A R300 000 R40 000 R52 000 R20 000 R30 000 R50 000 R60 000 Project B R300 000 0 R60 000 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%. R10 000 R90 000 R90 000 R90 000 R90 000 R90 000