Answer Happy

Question 5 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 5.1.3 5.1.4 Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to two decimal places). Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). Use your answers from question 5.1.3 to recommend the project that should be chosen. Motivate your choice. (3 marks) (5 marks) (6 marks) (1 marks)
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 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%. R60 000 R10 000 R90 000 R90 000 R90 000 R90 000 R90 000
5.2 Use the information provided below to calculate the Internal Rate of Return (expressed to two decimal places) using interpolation. INFORMATION (5 marks) 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. APPENDIX 1: PRESENT VALUE OF R1
Number d Periode 2 3 1 5 . . 6 11 12 15 13 1% 14 2% 4 09610 09238 0.885 0.8548 0.8227 07921 0.7629 07250 0.7084 05830 05587 0.6365 06133 0.5021 05718 05623 05337 05158 0458704823 0400 3% । 4% 5% 09615 09067 6% 7% 09001 0900405700 09615 09624 09434 09340 09059 09174 09091 0.0008 089 08850 08772 08606 08021 08547 05475 0.5403 02333 0.0000 09803 09612 09426 09046 05070 08000 0.8734 08573 08417 0.8064 08116 07972 07831 07696 07561 07432 67305 87182 07062 0064 06400 09706 09423 09151 08800 08638 02306 0.8163 07908 0.7722 07513 07312 67118 001 06750 04675 06407 06244 0.0006 0.5834 6578705120 7 09327 0.870608131 07900 0.7107 06661 06227 05835 05470 05132 04817 04523 04251 0.000 0.3758 0.353 0.3332 03130 02969 62791 0.207 8% 9% 09430 0.5080 08375 0.7903 0.7462 07050 050235 08535 67804 07207 06768 10% 11% 12% 13% 14% 15% 082 08219 0.7835 0.7473 07130 06806 06499 06209 05835 0.5674 058 05154 04972 04751 0.4561 04371 04180 04019 0.3277 10 09053 08200 0.7441 0.6796 06139 05564 0.5083 0.4632 0.4224 0.365 02522 83220 82946 02607 02472 02267 02080 61911 61796 01615 01 10% 17% 18% 19% 20% 20% 06302 05063 05645 0534 05006 04803 0.4056 04323 04104 038 03704 0.3521 03349 0.321 062740580 0.5403 05019 04065 04339 04030 63762 03506 0.3369 63000 62548 02560 02407 0230 01678 03143 08368 0.7064 0.7006 06446 05919 054309 05002 04604 0404103909 03606 0.3329 0.3075 0243 02630 02434 02256 0200001930 0130 08613 0.7430 06419 05563 04810 086308043 07224 0.5496 05547 0.528 0.4751 0.4280 0.36750505 03173 02875 02607 026 02149 0154 01775 05619 01476 01340.00 08874 0785 07014 06246 05568 0467004440 03071 03555 03186 0295 02567 02307 020601869 1685 1520 01372 01240 01122 0.0 CALED 08787 0.7730 06010 0600605303 04688 04150 03677 0342 0297 02575 42292 02042 01821 0625 0.1452 01299 G1M3 164200.000 0.8700 0.7579 06611 0.5775 05051 04423 03878 03405 0292 02633 0220 0.2046 1837 01567 01413 1252 01110 00 00779 000 0.3624 03152 02745 02394 02000 01827 0140101229 0107900949 003500736 0004 0.0052
14 15 16 17 18 19 20 25 30 40 3 60 0.8700 0.7579 06611 0.5775 05061 0.4423 0.3878 0.3405 02992 02633 02320 0.2040 01807 01587 0.1413 01212 01110 0.0005 006 00779 00440 0.8613 0.7430 06419 05663 04810 04173 03604 03152 02746 02304 02000 01827 0.1509 01401 0.1229 01079 00949 00835 0.0736 00649 00 OMM 0.7294 06232 0.5339 04581 03036 03367 02919 02519 02176 0.1883 01631 01415 01229 01000 00930 08444 071402 0.0050 05134 04363 0.3714 03166 02700 02311 0.1978 0.1006 01456 01252 01078 00909 0.0002 0.0000 0.0000 00520 0045100225 08360 0.7002 05874 04336 04156 03503 0.20 0.2502 02120 0.1790 01529 01300 01100 0094600808 00001 00811 0.0708 00618 00641 000 07796 06005 04776 0.3751 02963 02330 0.1542 01460 01100 0.8277 0.6864 0.5703 0.4746 0.3957 03305 02766 02317 0.1945 01635 0.1377 0181 00061 00829 00703 0.0006 0.0506 00431 000 00313 00144 DIOD 08196 06730 0.5637 0.4564 03700 03118 02564 02145 01754 01486 0.1340 01037 00868 00728 00011 00514 0.0003 CONS 0.0008 0001 00115 0.0008 0.0437 0.03 0.010 0560403048 01097 0.0961 00535 0.0300 00173 00069 00057 0.0023 0.0736 0058800471 00378 0.0004 00245 60197 00160 00129 0.0105 000 07419 05621 04120 0.3083 02314 0.1741 01314 00064 0.0754 0.0573 00437 00334 00256 00196 00151 0011 0000 0000 0.0004 00002 0.0012 06717 04529 03066 02083 01420 00872 00668 00460 0.0318 00221 00154 0.0107 0.0075 0.0053 0.0037 0.0006 00019 00013 00010 0000 00001 0.0003 0.0019 00011 00007 0.0004 0.0002 0.0001 06080 0.3715 0.2281 0.1407 00672 00643 00339 00213 00134 0.0005 00054 0.0005 0.0022 0.0014 0.000 0.0006 0.0004 00005 0.0002 00001 10000 APPENDIX 2: PRESENT VALUE OF A REGULAR ANNUITY OF R1 PER PERIOD FOR N PERIODS
Number d Periods 1 ex 2 3 4 5 6 7 - 6 10 11 12 1% 2% 1.9704 1.9416 19135 18061 18604 0.0001 09004 0:9700 09015 09624 0.9434 09346 67212 30020 3.8077 37171 14299 35400 4.8534 47135 4.5797 44518 76617 8.5060 5.7966 50014 54172 1.201 SOPST 9.4713 10.3676 3% 7.3250 62303 64720 81622 9.7968 4% 11251 105753 12.1337 113454 70197 7.7861 29410 2.8830 2.8296 2.7751 2.7232 26730 26043 25771 25313 24000 24437 24018 23612 23016 222 22450 2.2006 21743 21300 2105 5% 6.0001 5.7964 99640 6.7327 85300 8.1109 9.2526 A7605 74353 7.1078 9.3851 106350 09856 6.4632 7.7217 6% 83064 8.8633 7% 14001 1.3872 3.3121 42124 4.1002 19027 1.2008 49173 47065 48229 6.2017 5.5804 5.3000 5.2004 7.3601 18869 8300 8% 5.9713 6.512 18334 1.3000 1.7833 1.7501 17355 17125 16001 16681 16467 15257 15052 15862 1.5666 1546 1.5278 7.0096 09059 0.9174 0900100000 14387 79427 83677 57466 62000 9% 67101 10% 17% 12% 73350 75361 13% 38097 37900 1909 16045 08029 0.8050 08772 08080608621 14% 50330 464 47122 45630 44226 SAT77 61446 15172 58892 56802 15% 32367 31000 31004 30373 29745 29137 28560 2782 27432 26001 26306 25887 10% 17% 55348 53349 51461 4676 488 489 7.9038 TAND 1034 EN 4.2013 44800 43553 42305 41114 39975 10087 17845 3647 3582 14076 14000 132 0.8547 34331 3.3522 32743 31903 31272 30576 2.000 18% 59952 57900 55370 53282 51317 49464 47716 466 44506 43038 64215 6121815424 0.8475 0.0403 08310 5482 52161 50188 483324008 71807 68137 64104 6194 59176 56600 54206 51871 10% 20% 41804 40306 39224 3.8115 37057 3.604 44873 4346 43072 407m 39544 18172 5.5431 $342 E 51161 6.80526461 2065 59077 5609 54527 523375000 480GA 46000 445 4.9854 47932 41633 A310 9 A4GAT 4.30 4.15 992 45105 4430 40005 471 450
13 12.1337 11.344 10650 14 15 16 17 18 19 10 R 30 13.0037 12.1062 11,2961 147179 13.5777 125611 20 180456 29 15.5623 14.2919 13 1001 16.3963 14.9000 13.7535 138661 12.5403 119379 11.1104 10.3797 97122 17:2300 16.3514 14.8775 99006 22.0232 19.5235 174131 9.3806 8.8627 25.8077 22.3065196004 10.5631 9.2006 9.2960 11.8623 10.8378 10 1050 15.6785 143238 131139 120853 11.151 121957 112741 10.4773 8.3677 7.9008 8.7456 3 3 449650 34.7809 27656 2262351 ( 9.4466 8.8514 9.1079 8.5005 80607 76061 7.1909 681006460461422 5.6474 55755 530025006 4750 4.5% 12.4622 114000 10.5000 0.8181 40 328347 27 3566 251148 197928171501 15.0463 133317 8242 1.7062 13067 69819 66282 6.3005 6.0021 57245 5.4675 52295 50081 4.8023 45105 12.6603 116096 108276 100001 9.3719 8.7556 8.2014 77016 72497 6.8309 6467461280 58178 55330 52732 50333 48122 10.3306 9.5036 156221 14.0000 12.7834 116636 10474 17.2500 15.3725 137548 12.4090 11258 9.7632 91216 85436 80216 75488 7.1196 67291 63729 60472 57487 54746 5.2223 4.9807 47746 74860 7.1034 6.7499 6.4235 6.1218 5804 55831 53623 51183 43005 16.161414032 825 11.10 47147 45307 12:37M 83126 78237 73792 69740 66000 6.2951 59542 56695 5.4053 51634 49377 47296 89601 83649 78393 73668 65380 65604 61982 58775 55845 53162 50900 4045 81285 45136 79633 704 70248 66231 62503 55208 54278 53127 51000 46 107574 3771 50 39.1981 31.0 25.720 21.822 182559 1719 13.8007 122335 1817 99145 50417 83045 76752 713276605 623 55801 55541 13623 498 98226 0770 84217 7501 7.3300 68729 6.4641 60071 5.7062 5460951961 4.90 SI 102737 40 88035 8055274967 7600765660 61772 58294 55565 52347 499 8901 820 75344 71050 56418 62335 58713 55482 62542 40000 1104093672 507% 83040 76873 71401 65651 42402 510 55663 13000 40000