QUESTION 4

4.1. You invest R 20 000.00 at an interest rate of 10% per annum. After how many years will your investment grow to a value of R 28 000.00 if the interest earned is: 

4.1.1. simple?

4.1.2. compounded? 

4.2. You consider buying a business for R 600 000. The business is expected to run for 5 years and the following net returns are expected. 

YEAR 1 : R 160 000

YEAR 2 : R 250 000

YEAR 3 : R 190 000

YEAR 4 : R 180 000

YEAR 5 : R 130 000 

Should you buy the business? A project of this type is expected to return at least 11% per annum. (Show details of your calculations.)