Question 6 (10 marks) Part A (5 marks) Metro Car Washes, Inc. is reviewing an investment proposal. The initial cost as well as the estimate of the book value of the investment at the end of each year, the net after-tax cash flows for each year, and the net income for each year are presented in the following schedule. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life. Annual Net After- Tax Cash Flows Annual Net Income Year 0 1 2 3 4 5 Initial Cost and Book Value $105,000 70,000 42,000 21,000 7,000 0 $50,000 45,000 40,000 35,000 30,000 $15,000 17,000 19,000 21,000 23,000 Management uses a 16 percent after-tax target rate of return for new investment proposals. Required: (a) Compute the project's payback period, assuming that the cash flows in years 1 through 5 occur uniformly throughout each year (e.g. for Year 1, monthly cash flow is $4,166.67). (3 marks) (b) Calculate the accounting rate of return on the investment proposal. (2 marks) Part B (5 marks) Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return that she is earning. For example, three years ago she paid $13,000 for 200 shares of Malti Company's common stock. She received a $420 cash dividend on the stock at the end of each year for three years. At the end of three years, she sold the stock for $16,000. Kathy would like to earn a return of at least 14% on all of her investments. She is not sure whether the Malti Company stock provided a 14% return and would like some help with the necessary computations. Required: Using the net present value method, determine whether or not the Malti Company stock provided a 14% return to Kathy