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QUESTION 5 Read the information below and answer the following questions INFORMATION The management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each of which requires an initial investment of R2 500 000. The following information is presented to you: 5.1 5.2 5.3 Year 5.4 1 5.5 2 3 4 5 PROJECT COS Net Profit R 130 000 130 000 130 000 130 000 130 000 PROJECT TAN Net Profit APPENDIX 1: PRESENT VALUE OF R1 R A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method. 80 000 Use the information provided above to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. Payback Period of Project Tan (expressed in years, months and days). Net Present Value of Project Tan. Accounting Rate of Return on average investment of Project Tan (expressed to two decimal places). Benefit Cost Ratio of Project Cos (expressed to three decimal places). Internal Rate of Return of Project Cos (expressed to two decimal places) USING INTERPOLATION. 180 000 120 000 220 000 50 000 (3 marks) (4 marks) (4 marks) (4 marks) (5 marks)
7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 60 d Periods 1 2 3 4 5 6 7 8 9 10 11 13 14 15 16 17 19 20 0.9327 0.8706 08131 0.7599 0.7107 05661 06227 0.5835 05470 05132 0.4817 04523 04251 0.3996 0.375 03538 6.3332 03139 0.2959 0.2791 02097 25 0.9235 0.8535 0.7994 0.7307 0.6768 0627405829 0.5403 0.5019 0.4665 0.4335 0.4099 0.3762 03506 0.336 03060 2848 0.2660 0.2487 02326 0.1678 30 1.9143 08368 17564 0.7005 1.5446 0.5919 05439 0.5002 1.4504 04241 1.3905 0.3606 63329 03075 0284302630 2434 02255 0.2090 01538 2:1342 0.9053 08203 07441 0.6796 0.6139 05584 0.5083 04632 04224 0.3855 0.3622 03220 0.2548 02867 0.2472 02267 2080 0191 0.1756 01615 1074 1.8063 08043 1.7224 0.6496 0.5847 05266 0475 0.4285 1.3875 0.3505 0.3173 0.2875 0.2607 02366 02145 0196461778 01619 0.1476 1346 0858 18874 0.7885 0.7014 06246 1.556 0.4970 0.4445 0.3971 0.3555 0.3186 0.2858 02567 0.2307 0.2076 0.18 01685 1520 01372 0.1340 0.1122 0687 0.8787 0.7730 0.6810 0.6006 0.5303 0.4685 0.4158 0.3677 0.3262 0.2867 0.2575 0.2292 0.2042 01821 0.1625 01452 1299 0.1163 0.1042 009350550 0.8700 0.757906611 0.5775 0.5051 0.4423 0.3879 0.34051295202533 0232912045.1807 015570.1413 0.1252 01110 0.0965 0.0876 00779 0440 0.8613 0.7430 06415 0.5583 0.4810 04173 0324 0.3152 02745 02394 0.2090 0.1827 0.1999 01401 0.1229 01079 0949 00835 0.0736 00549 0.0352 1.8528 0.7284 06232 0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 02176 0.1883 01631 01415 01229 0.106 00930 0081100708 0.0618 0054100081 0.8444 07142 08050 05134 0.4363 03714 0.3166 0.2705 02311 0:1976 0.1696 01456 1252 0107800629 00802 0650 00800 0.0620 0045100225 1.8360 0.7002 0.5874 0.4906 01.4156 0.3503 0295 0.2502 0.2120 0.1799 0.1529 01300 1108 00945 01.08000601 02 00508 0.0437 00376 080 023171945 01635 0.1377 0.1161 0.098100829 0.0702 0.05960506 0.0431 0.0367 00313 01:44 11.8277 0.6864 1.5703 0.474601395703305 0.2766 0.8195 0:6730 05537 0.4564 0.3768 03118 02584 02145 0.1784 01486 0.1340 0.1037 0.0868 0.0729 006110051410433 0.0365 0.030800261 0.0115 0.7798 0.6095 0.4776 0.3751 0.2953 0.2330 0.1842 0.1460 01160 0.0923 0.0736 0.0588 0.0471 0.0378 0.0304 00245 40197 0.0160 0.0129 00105 0.0038 0.7419 0.5521 0.4120 0.3083 0.2314 0.1741 0.1314 0.0964 0754 00573 0.0437 00334 0254 00196 00151 00116 0090 0.0070 0.0054 00042 0.0012 0.6717 0.4529 0.3066 0.2083 0.1420 00972 0.0668 0.0460 0.0318 00221 0.0154 00107 0075 0.0053 0.0037 000240018 0.0013 0.0010 0.0007 0.0001 1.6080 0.3715 0.2281 0.1407 0.06872 0.0543 0.035 0.0213 0.0134 0.0085 0.0054 0.0035 0.0022 0.0014 0.0009 0.0005 4.0004 0.0003 0.0002 0.0001 0.550403048 01697 0.0961 0.0635 0.0303 0.0173 0.0099 0.0057 00033 1.0015 0.0011 0.0007 0.0004 0.0002 0.0001 0.0001 1% APPENDIX 2: PRESENT VALUE OF A REGULAR ANNUITY OF R1 PER PERIOD FOR N PERIODS 2% 3% 5% 1.9704 19416 19135 18861 7% 10% 11% 12% 13% 0.9901 09804 0.9709 0.9615 09624 0.9434 0:9346 09259 0.9174 0909 0.9009 08529 0.8850 0.8772 08696 08621 05547 0.8475 08403 0.8333 1894 18334 1.8080 1.7833 17561 17355 1.7125 15901 1661 1667 16257 16052 15852 15656 15465 29410 28839 28286 2775 2.7232 2.6730 26243 25771 25313 2486 24437 24018 23612 2.3216 2.2832 2.2450 22095 2.1743 21309 . 3.9020 3.8077 3.7171 36296 3.5460 3.4651 3.3872 3.3121 32397 3.1696 31024 3.0373 29745 2.9137 28550 27982 27432 2.6901 26386 2:5887 4.8534 47135 45797 4.4518 4.3296 42124 4.1002 3.9927 38897 3.7908 16969 16048 35172 3.433 33522 12743 31963 1.1272 10576 12 112561 10.5753 9.9540 5.385 886338.3836 7.9427 75361 7.1807 68137 6.4924 1944 59176 66603 54206 1571 498844.7532 46105 44352 6.7282 6.4720 62300 6.002157864 5.5824 5.3893 5.2064 50330 4.8654 47122 4563844225 4.2882 41604 40396 39224 381 15 37067 5.7965 5.6014 54172 5242 5.0757 49173 4.7665 4.5229 4.4859 4.3553 42305 41114 39975 3.8887 3.7845 16847 15892 3.49763-4098 3.355 20% 7.6517 7.3255 70197 6.7327 6.4632 6.2098 59713 57466 55348 53345 514614967647985 4636 44873 43036 4207240776 19544 38372 18 16.3983 149800 13.7535 126550 11.689 10.8276 10.0691 93719 8.5660 8.1622 77861 74353 7.1078 6.8017 6.5152 6.2469 5.9962 5.799€ 5.5370 53282 51317 4.964 47716 4.6065 44505 4.3038 41633 40310 2.9906 9.4713 89826 85302 81106 7.7217 7.3601 7.0236 6.7101 64177 6.1446 58892 55602 5426252161 50188 48332 46586 4.494 43389 4.1925 10.3676 9.786892526 8.7506 8.3064 7.8869 7.4987 7.1390 6.8062 6.495 62065 5.9377 5.6869 5.4527 52337 50286 48364 4.6560 4.486543271 36046 12.1337 11.3484 10350 59858 1.353 88627 8.3677 79008 74869 7.1034 67499 4235 61218 1804 558311342351183 4909647147 45327 13.0097 12.1062 112561 105631 9.8986 9.2950 8.74558.2442 7.7862 7.3667 69819 €6282 630256.0021 57245 5.4675 52283 5.008 48023 4.60€ 13.8661 128493 119379 11.1184 10.3797 9.7122 9:1079 8:5595 8.0607 7,6061 7.1909 8109 64624 6.1422 58474 5756 5.3342 5.0816 48759 46756 147179 13.5777 125611 116529 10.8378 10.1059 9.4466 8.8514 8.312578237 7.3792 69740 6.60039 6.265 5.9542 5.6685 5.4063 5.1624 49377 4.7296 87556 8.2014 7.7016 17.2260 156785 14:3238 131338 12.0853 11.1581 10.3956 9:6036 85601 8.3645 7.8383 15.5623 14:2919 13:1661 12:1657 112741 10.4775 9.7632 91216 85435 80216 7.5488 7.1196 67291 6.3725 60472 57487 54745 52223 49887 47746 40 328347 27.3565 23.1148 18.7928 17.199 15.0463 13.3317 11 3286 7285768389 6.4674 61280 18:78 55339 5.2732 50333 48:22 7.3658693806.5504 61982 5.8775 55845 6.3162 5070048436 18.0456 16.3514 14.8775 13.5903 12.4822 11.4699 10.5940 98181 9.1285 8.5136 7.9633 7.469470248 6.6231625835938856278 5.3527 51009 4896 220232 195235 17.4131 15622 14.0635 12.7834 11.6536 106748 98225 90770 84217 78431 7.3300 6.8725 6.4641 6.0671 57662 5.4668 51961 49476 25.8077 22.3965 19.6004 17.2920 15.3725 13.7648 12.4090 11.2576 102737 9.4266 8.6938 20652 7.4957 7.027 5660 £1772 58254 5.5168 52347 49789 60 44.9550 34.7609 27 6756 22 6236 18.9093 16.1614 14.0392 123766 11.0480 9.9672 90736 3240 7.5873 7.1401 6.6661 €2002 5.8819 5.5653 5.2630 10.7574 1.779 89511 8.2438 76344 7,1050 66418 6213558713 55482 52582 4.9900 50 39.1961 31.4296 257296 21.4822 18.2558 15.7619 13.8007 122335 10.9617 9.9148 90417 8.3045 76752 7.1327 6.6605 62463 58801 5.5541 5.2623 4.9996
5.5 IRR: PROJECT COS Year Investment Net Discount Discount Present Factor Factor value IRR = cash flow NPV (Or you may use your own format) % (5 musolee) % % Present value %
5.4 BENEFIT COST RATIO: PROJECT COS (Or you may use your own format) BENEFIT COST RATIO: PROJECT COS= (4 marks)
5.3 ACCOUNTING RATE OF RETURN PROJECT TAN (4 marks)
5.2 NPV: PROJECT TAN Year 2 NPV 3 4 5 Total PV investment Net Cash flow Discount Present Factor value (4 marks)
5.1 PAYBACK PERIOD: PROJECT TAN Investment Workings: Payback period is: