Given Information Penang, Malaysia

Initial cash outlay $6,000,000

Useful life 20

Operating income 1,750,000

The cost of capital 9%

Tax rate 40%

Net cash flow Net Income Cash Flow

Operating income $1,750,000 $1,750,000

Depreciation 300,000

Net Income before taxes 1,450,000

Tax, 40% 580,000 580,000

Net Income $870,000

Net cash flow $1,170,000

How would you find the average Book Value of Investment for each year?

Average net income and average book value of investment

Year Net Income Avg BV of Investment

1 $870,000

2 870,000

3 870,000

4 870,000

5 870,000

6 870,000

7 870,000

8 870,000

9 870,000

10 870,000

11 870,000

12 870,000

13 870,000

14 870,000

15 870,000

16 870,000

17 870,000

18 870,000

19 870,000

20 870,000

What is the average rate of return of investment?

What is the payback period?

What is the net present value?

What is the internal rate of return?