Question: T.K. Company Limited intends to set up a fruit processing plant in Mukono. It is estimated that the investment will cost Shs.1600m. Depreciation will be

T.K. Company Limited intends to set up a fruit processing plant in Mukono. It is estimated that the investment will cost Shs.1600m. Depreciation will be 20% on a straight line basis over 6 years of useful life of the plant. Tax is 15% per Anum of the profit. The projected earnings are before depreciation and tax are: -

Year Profits before tax

1 20m

2 40m

3 50m

4 60m

5 30m

6 80m

Determine the Average Rate of Return (ARR) for the project

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