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2 5 Given Data: 7 PB 11-4 part for ARR, Payback and IRR A. ARR, Accounting Rate of Return 9 Initial Investment $860,000 ARR - 10 Useful ufe 6 Years 11 Annual Net Income 566,000 Calculation of cash flow needed for B thru D, you do need the salvage value 12 Cost of Capital 11% 13 (Use as Hurtle rate) 14 Salvage Value $60,000 Net Income Add back non cash expenditures (straight line) 15 Depreciation 16 Add'l data for NPV Calculation anly Cash Infiow 17 18 Working capital $20,000 B. Payback Perlod 19 Years 20 21 22 C Net Present Value (Calculate below( 23 24 25 Discount Present Cash flow 26 Item Years Factor Value Totals actually always belorg at the top 27 NET PRESENT VALUE Initial Investment since it's really what you want to see first 28 Annual Inflow 29 Working Capital 30 31 Working Capital Salvage Value 32 33 34 35 D. Internal Rate of Return Cash flows by year 36 Year 4 37 Use excel IRR formula Year 0 Year 1 Year 2 Year 3 Year 5 Year 6 OK, you can type this data in 38 IRR - OK, you can type this data in OK, you can type this data in Not this data 39 40 Year Total 41