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

Answer rating: 100% (QA)

To calculate the payback period average rate of return net present value profitability index and internal rate of return for each project we can use the provided cash flows and the required rate of re... View the full answer