4.1 REQUIREDUse the information provided below to answer the following questions:4.1.1 Calculate the Payback Period of Project A (answer expressed as years, months and days) (3)4.1.2 Calculate the Benefit Cost Ratio (BCR) of both projects (answer expressed to 3 decimal places). (11)4.1.3 Which project should be chosen on the basis of BCR? Why? (1)INFORMATIONSlater Limited is looking at the possibility of investing in one of two new projects, Project A or Project B.Project A would cost R300 000, and its net cash inflow is estimated to be R100 000 per year, except forthe third year. The project would last for five years but would need a major overhaul costing R80 000(not considered in the figures above) at the end of the third year.Project B is expected to cost R300 000 and have a useful life of six years. Annual net cash inflows fromthis project are forecasted to be R88 000 per year. The project is expected to have a scrap value ofR30 000 at the end of its useful life (not included in the R88 000 above).4.2 REQUIREDCalculate the Internal Rate of Return of each project. Use interpolation to arrive at your answer. (10)INFORMATIONTwo projects are being evaluated for possible acquisition by Camray Corporation. Forecasts relating tothe two projects are as follows:Project X Project YPurchase price R500 000 R500 000Expected useful life 5 years 5 yearsEstimated salvage value 0 0Net cash inflows: R RYear 1 150 000 110 000Year 2 150 000 140 000Year 3 150 000 200 000Year 4 150 000 210 000Year 5 150 000 100 00The cost of capital is 15%.
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