A company, Myopia, has the following details for its new potential product, the Telescope.

 Myopia’s cost of capital is 10%. The capital outlay is for the Jodrell machine which will last 10 years. The capital inflow of £5,000 is the scrap value after 10 years.

Required:

Calculate

(i) the payback period

(ii) the accounting rate of return

(iii) the net present value

(iv) profitability index

(v) the internal rate of return.

Transcribed Image Text:

Expenses Taxation (Excludes Depreciation) Year Capital Capital Revenue Interest Outlay Inflow (700,000) - - 0123456789 10 10 270,000 20,000 320,000 20,000 340,000 20,000 (40,000) (130,000) (4,500) 345,000 20,000 (160,000) (18,375) (185,000) (24,281) 430,500 20,000 (205,000) (48,361) 330,300 20,000 (160,300) (35,033) 200,600 20,000 (100,100) (16,825) 145,300 20,000 (46,500) (18,034) 85,200 20,000 (28,100) (6,925) 5,000 38,600 20,000 (8,300)