ABC LTD is considering two mutually exclusive projects requiring an initial cash outlay of 10,000 each and with a useful life of 5 years. The company required rate of return is 10%. Cash flows are given as follows:

 

ABC LTD is considering two mutually exclusive projects requiring an initial cash outlay of  10,000 each and with a useful life of 5 years. The company required rate of return is 10%. Cash flows are given as follows:

YEAR 1 2 3 4 5

Project A 3,000 3,000 3,000 3,000 3,000

Project B 4,000 2,500 2,000 3,500 3,500

Required:

Calculate for each project

i. The payback period

ii. The average rate of return

iii. The net present value

iv. Profitability index

v. The internal rate of return