ABC ltd is proposing to modernize its milk processing plant located in industrial area. The

additional investments will cost Tshs $60$m and other carriage charges will cost Tshs $10$m$.$

Clearing charges are expected at Tshs $5$m and the company currently spends Tshs $7$m

on salaries of technicians who maintain its equipment$$s$.$ These salaries are expected to

increase to Tshs $10$m as an additional engineer will be required. The new equipment will

be housed in an extension at no cost$.$ This was formerly used as a warehouse at a rental

income of Tshs$6$m per year.

REQUIRED:

Derive the initial outlay on proposed investment that you are the chief executive of Santilia Dar Ltd in Tanzania and the

company directors have decided to embark into a project to establish a profitable housing

project that shall add more revenue to the company. You are requested to do the

following:$$

Determine the internal rate of return of the following Housing project proposals when:

i$.$

An outlay of $3,600$ is expected to produce an inflow of cash of $4,500$ after one year

ii$.$

Housing project today of $600$ is expected to generate benefits of $720$ one year from

today.

Answer rating: 100% (QA)

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