At the beginning of 2015, a business enterprise is trying to decide between two potential investments.

Required: Assuming a required rate of return of 10% p.a., evaluate the investment proposals under: (a) return on investment, (b) payback period, (c) discounted payback period, and (d) profitability index.

The forecast details are given below.

	Proposal A	Proposal B
Cost of Investment	$20,000	28,000
Life	4 years	5 years
Scrap Value	Nil	Nil
Net Income (After depreciation and tax)
End of 2015	$500	Nil
End of 2016	$2,000	$3,400
End of 2017	$3,500	$3,400
End of 2018	$2,500	$3,400
End of 2019	Nil	$3,400

It is estimated that each of the alternative projects will require an additional working capital of $2,000, which will be received back in full after the end of each project.

Depreciation is provided using the straight line method. The present value of $1.00 to be received at the end of each year (at 10% p.a.) is shown below:

Year	1	2	3	4	5
P.V.	0.91	0.83	0.75	0.68	0.62

?