Consider a project with the following characteristics:
Initial cost Kshs 500,000
Scrap value Kshs 100,000
Stream of income before depreciation and taxes are as follows:
Kshs.
Year 1
Year 2
120,000
Year 3
140,000
Year 4
160,000
Year 5
Let tax = 50% and depreciation straight line.
Required: Calculate the accounting rate of return
(5 marks)

b) What is the payback period?

Answer rating: 100% (QA)

The detailed answer for the above question is provided below Average Annua... View the full answer