Capital Investment Problem An investment now of 200,000 in Project T is expected to produce a net income (positive cash flow) of 70,000 at the end of each of the next 5 years. The original 200,000 investment will not be recovered at the end 1. 2. 3. What is the accounting rate of return of the project? What is the payback period of the project? Should a firm which can earn 15% per annum on alternative investments of equivalent risk) undertake Project T? 4. How much more than 200,000 could the firm invest in Project T and stil be better off? 5. Assuming the firm invests 300,000, what is the minimum annual net income needed for five years for the investment to be worthwhile? 6. Assuming the firm invests 200,000 and the annual net income is 70,000, for how long must the project last to be worthwhile? . 4 years? e 5 years? . 7 years? 7. What is the "Internal Rate of Return" (sometimes called the "DCF yield") on Project T, as outlined in the first sentence above? Should a firm which can earn 15% per annum on alternative investments (of equivalent risk) undertake Project U? In return for an initial investment of 200,000 Project U is expected to produce returns as follows:- End of Year 1 60,000 End of Year 2 65,000 End of Year 3 70,000 End of Year 4 75,000 End of Year 5 80,000