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The initial investment for the project is $250,000 and the project will run for seven years and the following Cash flows will be generated. Cash

The initial investment for the project is $250,000 and the project will run for seven years and the following Cash flows will be generated. Cash flows are reported below. 

The company also reported the following information. 

Let's say the company generates $300,000 in revenue for the first year and will grow 5 percent over the investment period. The first year expense is $200,000 and can increase by 7 percent each year. This company uses the straight-line method of depreciation and the useful life for the Investment is eight years. The company is also subject to 40% tax.

Year

cash flows

1

41.000

2

48.000

3

63.000

4

79.000

5

88.000

6

64.000

7

41.000


Questions

Using the discount rate 1.2%,3%,4%,5%,6%,7%,8%,9%,10%,11,12%,13%,14%<15%

calculate:

1. NBD,

2. PROFITABILITY INDEX,

3. AVERAGE ACCOUNTING INCOME

4. REFUND METHOD

5. DISCOUNT REFUND TIME

Note: Show all formulas and calculations.

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SOLUTION 1 To calculate the required measures we need to first calculate the present value of the cash flows using the given discount rates and then use these present values to calculate the required ... blur-text-image

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