The director of Apocalypto ltd. has asked you to analyze a proposed capital investments with an initial capital outlay of Sh. 10 million. The required rate of return for the project is 15%. He expects the project to yield the following net cash flows after tax over its useful life of 5 years.

Expected Net Cash Flows (Sh000)

Year 1 2 3 4 5

Net cash flows (sh.000) 3,000 4,000 5,000 4,000 2,000

Required:

i) Calculate the projects Accounting Rate of Return (ARR). (2 marks)

ii) Calculate the projects Payback Period (PBP). (2 marks)

iii) Calculate the projects Net present value (NPV) (3 marks)

(Total 10 marks)