Question $3$

Excellence Through Knowledge Limited $($ETK$)$ is considering two projects. The initial capital

outlay for each project is US $$75,000.$ The cost of capital for the company is $9\%.$ The cash flow

for each project are detailed in the table below.

A$.$ Calculate each project's Payback period

B$.$ Assuming that the projects are mutually exclusive, which project$($s$)$ would you

recommend according to the Payback period? Why would you make this

recommendation?

$(2$ marks$)$

C$.$ Calculate each project's Net Present Value $($NPV$).$

$(6$ marks$)$

D$.$ Assuming that the projects are independent, which project$($s$)$ would you recommend

according to the NPV$?$ Why would you make this recommendation?

$(2$ marks$)$

E$.$ Calculate the Restaurant's Average Accounting Rate of Return.

$(8$ marks$)$

F$.$ Explain the TWO $(2)$ major problems with the Internal Rate of Return $($IRR$)$ that are

addressed by using the Modified Internal Rate of Return $($MIRR$).$ Explain how the

MIRR addresses these problems.

$(6$ marks$)$