Rao & Rao Corporation is considering investing in a project requiring a capital outflow of Rs.2,00,000. Forecast of net income and cash inflows are given below: Forecasted Cost of Capital of the project is 10%.

Year

1 2 3

Net Income

85,000 90,000 95,000

Cash Inflows

70,000 75,000 66,000

4 80,000

5 40,000

You are required to compute the following

a. Pay-Back period method

b. Accounting Rate of Return

66,000 20,000