$\backslash$begin$\{$tabular$\}\{|$l$|$c$|$c$|\}$

$\backslash$hline & $\backslash (\backslash$mathbf$\{$R O$\}\backslash )$ & $\backslash (\backslash$mathbf$\{$R O$\}\backslash )\backslash \backslash$

$\backslash$hline Initial investment & $\backslash (\backslash$mathbf$\{(100,000)\}\backslash )$ & $\backslash (\backslash$mathbf$\{(100,000)\}\backslash )\backslash \backslash$

$\backslash$hline Operating Profit before depreciation year $1$ & $60,000$ & $54,000\backslash \backslash$

$\backslash$hline Operating Profit before depreciation year $2$ & $50,000$ & $46,000\backslash \backslash$

$\backslash$hline Operating Profit before depreciation year $3$ & $40,000$ & $40,000\backslash \backslash$

$\backslash$hline Operating Profit before depreciation year $4$ & $30,000$ & $36,000\backslash \backslash$

$\backslash$hline Operating Profit before depreciation year $5$ & $25,000$ & $25,000\backslash \backslash$

$\backslash$hline Scrap value year $5$ & $0$ & $0\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$

The company's standard payback period is $2\mathrm{.}5$ years and standard ARR is $\backslash (18\backslash \%\backslash ).$ The cost of capital is $\backslash (10\backslash \%\backslash )($discount rate$).$

You are requested to evaluate these two long term investment proposals using the following capital budgeting techniques.

A$.$ Payback Period of Proposal X and Y

$(8$ Marks$)$

B$.$ Accounting Rate of Return of Proposal X and Y $(10$ Marks$)$

C$.$ NPV of Proposal X and Y

$(8$ Marks$)$

$\backslash$begin$\{$tabular$\}\{|$c$|$c$|$c$|$c$|$c$|$c$|\}$

$\backslash$hline Year & $1$ & $2$ & $3$ & $4$ & $5\backslash \backslash$

$\backslash$hline $\backslash$begin$\{$tabular$\}\{$c$\}$

PV Factor $\backslash \backslash$

$\backslash ($ @ $10\backslash \%\backslash )$

$\backslash$end$\{$tabular$\}$ & $0\mathrm{.}909$ & $0\mathrm{.}826$ & $0\mathrm{.}751$ & $0\mathrm{.}683$ & $0\mathrm{.}621\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$

D$.$ Profitability Index of Proposal X and Y$.$

$(4$ Marks$)$

E$.$ IRR of Proposal X and Y using MS Excel spreadsheet

$(6$ Marks$)$