In order to improve its liquidity position Anchors Investors Ltd is considering investing in three projects; Project P, Project Q and Project R with initial investments of $2,00,000, $4,000,000 and $5,000,000 respectively. Each project is expected to have a life of five (5) years. The profits generated by the projects are as follows:

After tax and depreciation profits

Year	Project P	Project Q	Project R
1	500,000	1,200,000	1,600,000
2	500,000	1,000,000	1,100,000
3	500,000	1,250,000	1,300,000
4	500,000	1,200,000	1,400,000
5	500,000	900,000	1,200,000
Total	2,500,000	5,550,000	6,600,000

Calculate the average profits for each project on initial capital. (3 marks)

Calculate the average capital for each project. (3 marks)

Calculate the accounting rate of return (ARR) on initial capital. (6 marks)

Calculate the accounting rate of return (ARR) on average capital. (6 marks)

Assuming that finance is available briefly outline three factors that will influence the investors decision. (4 marks)

State two (2) advantages associated with the use of the Payback method of project appraisal. (3 marks).