1.1 Required

Calculate the following from the information provided below

1.1.1 Accounting Rate of Return on (on average investment) of project CHI ( answer rounded off to 2 decimal places)

1.1.2 Net Present Value of Project THI

1.1.3 Internal Rate of Return of Project CHI, if net cash flows are 80000 per year for 4 years, (Answer rounded off to 2 decimal places)

Information

Kurba Limited had to choose between purchasing machinery for two projects, CHI and THI, for which the following profits are forecast:

Year CHI THI

1 20000 5000

2 20000 18000

3 20000 24000

4 20000 33000

Each project requires an investment of 240000. the machinery have no salvage value. the cost of capital is 12 %. the straight line depreciation is used.

NB: Discount Factors are as follows

Project THI

year Discount factor

1 0.8929

2 0.7972

3 0.6355

4 0.5674

Project CHI

Year 12% 13%

1-4 3.0373 2.9745