Question $4(20$ Marks$)$

a$)$ An initial investment of $$130,000$ is expected to generate annual cash inflow of $$32,000$

for $6$ years. Depreciation is allowed on the straight$-$line basis. It is estimated that the

project will generate scrap value of $$10,500$ at end of the $6$th year. Calculate its

accounting rate of return assuming that there are no other expenses on the project. $[5]$

b$)$ Assume that the cost of the investment is N$ $7\mathrm{.}5$ million and will result in cash flows of N$ $6\mathrm{.}5$ million in year $1,$ N$ $4\mathrm{.}9$ million in year $2$ and N$ $3\mathrm{.}5$ million in year $3.$ Thefirm$$s cost of capital is $20\%.$ Find the Net Present Value. $[10]$

c$)$ Calculate the payback period for a project with an initial investment of N$$2,400,000$ with cash flows of N$$370,000$; N$$275,000$; N$$185,000$; N$$165,000$ in

Years $1,2,3$ and $4.$