A proposed investment is not expected to have any salvage value at the end of its 5 -year life. For present value purposes, cash flows are assumed to occur at the end of each year. The company uses a 12% after-tax target rate of return.

Year Book Value Annual Net After Tax Cash Flows Annual Net Income

0 P500,000 P 0 P 0

1 336,000 240,000 70,000

2 200,000 216,000 78,000

3 100,000 192,000 86,000

4 36,000 168,000 94,000

5 0 144,000 102,000

Required:

a. accounting rate of return based on

(1) original investment

(2) average investment

b. net present value

c. traditional payback period

d. discounted payback period

e. profitability index