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QUESTION 5. 5.1 REQUIRED Study the information given below and answer the following questions: 5.1.1 Calculate the Payback Period of Project A (answer expressed in years, months and days). (3 marks) 5.1.2 State two disadvantages of using the payback period as a technique to evaluate projects. (2 marks) 5.1.3 Calculate the Net Present Value of Project A (amounts rounded off to the nearest Rand). (4 marks) 5.1.4 Calculate the Accounting Rate of Return (on average investment) of Project B (answer expressed to two decimal places). (5 marks) INFORMATION Zebra Limited has the option to invest in machinery in Projects A and B but finance is only available to invest in one of them. The following projected data is available: Project A Project B R R Initial cost 600 000 600 000 Net cash inflows: Year 1 Year 2 Year 3 Year 4 Year 5 144 000 168 000 192 000 208 000 124 000 165 000 165 000 165 000 165 000 165 000 Additional information 1. Project A is expected to have a scrap value of R24 000 (not included in the figures above). No scrap value is anticipated for Project B. 2. Depreciation is calculated on a straight-line basis over 5 years. 3. The discount rate used by the company is 12%. 5.2 REQUIRED Calculate the Internal Rate of Return from the information provided below. (6 marks) INFORMATION A machine with a purchase price of R504 000 is estimated to reduce cash operating expenses by R144 000 per year. The machine will last 5 years, with no residual value expected at the end of its life.

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