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Refer to the proposed acquisition of a new machine for purchase and installation during the second quarter of

$2024$ and answer the following questions:

$3\mathrm{.}1$ Calculate the Payback Period $($expressed in years, months and days$)(3$ marks$)$

$3\mathrm{.}2$ Calculate the Accounting Rate of Return on initial investment $($expressed to two decimal

places$).(4$ marks$)$

$3\mathrm{.}3$ Calculate the Internal Rate of Return $($expressed to two decimal places$).$ Your answer must

include two net present value calculations $($using consecutive rates$/$percentages$)$ and

interpolation. $(6$ marks$)$

$3\mathrm{.}4$ Calculate the Net Present Value if the machine is expected to have a scrap value of

R$300000.(6$ marks$)$

$3\mathrm{.}5$ Suppose Capri Ltd funds the purchase of the new machine through the issue of $12\%$

preference shares that are expected to sell for R$10$ each. If the floatation costs are

estimated at R$1$ per share, calculate the cost of the preference shares $($expressed to two

decimal places$).(3$ marks$)$

$3\mathrm{.}6$ Suppose Capri Ltd funds the purchase of the new machine through the issue of ordinary

shares. Assume that the present value of an ordinary share of Capri Ltd is R$17\mathrm{.}25,$ the next

projected dividend is R$1\mathrm{.}80$ per share and the expected growth rate in dividends is $15\%$ p$.$a$.$

Use the Gordon Growth Model to estimate the cost of the ordinary shares $($expressed to two

decimal places$).$

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