An investment has the following cash flows: Year Cash Flow 0 (R 60 000) 1 R10 000 2 R12 000 3 R28 000 4 R20 000 5 R30 00

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An investment has the following cash flows:
Year
Cash Flow
0
(R 60 000)
1
R10 000
2
R12 000
3
R28 000
4
R20 000
5
R30 000
Required:
1.1 Calculate the Payback period. (5)
1.2 Calculate Net present value (NPV) at 12% cost of capital.
(11)
1.3 Explain whether or not the investment should be accepted.
Provide reasons for
your decision. (3)
1.4 Evaluate the payback period method as a technique for
investment appraisal. (6)
NB:
Use the following discount factors for the calculation of the
NPV:
Year
Discount factor
1
0.893
2
0.797
3
0.712
4
0.636
5
0.567