A company is considering an investment proposal to install new milling controls. The project will cost Kes50,000. The facility has a life expectancy of five years and no salvage value. The company's tax rate is 40%.The estimated cash flows from the proposed investment proposal are as follows:

YearCF

110,000

211,000

314,000

415,000

525,000

Compute:

a.Accounting Rate of Return and advise management if

the required rate of return is 6 % (4Mks)

b.Traditional Payback period and advise management

on the feasibility of the project (4Mks)

c.Discounted payback period at 6% discounting factor (4 Mks)

d.Net present value at 6% discounting factor and advise

management on the project's feasibility (4 Mks)

e.Net present value at 15% discounting factor and advise

Management on the project's feasibility ( 4 Mks)

f.Internal rate of return and explain its significance to the firm(6 mks)

g.Profitability Index at 10% discounting factor ( 4 Mks)