Wetday is evaluating three projects: the Storm, the Cloud and the Downpour. The company’s cost of capital is 12%. These projects have the following cash flows.

Required:

Calculate

(i) the payback period

(ii) the accounting rate of return (assume cash flows equal profits)

(iii) the net present value

(iv) the internal rate of return.

Storm Cloud Downpour Year 0 (Initial outlay) (18,000) (12,000) (13,000) Cash inflow 123 4,000 5,000 4,000 2 3 5,000 2,000 4,000 6,000 3,000 4,000 4 7,000 2,500 4,000 5 8,000 3,000 4,000