Compute the average rate of return

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Reference no: EM132955959

Question - MTN is considering an investment proposal to install a new special connection control at cost 50000 USD; the facility has a life expectancy of 5 yers and no salvage value the tax rate is 35%.

Assume the firm uses straight line depreciation and the same are allowed for tax purposes the estimated cash flows before depreciation and tax (CFBT) from the investment proposal are as follows:

Year

CFBT

1

10000

2

10682

3

12769

4

13462

5

20385

Required -

1. Compute the payback period.

2. Compute the average rate of return.

3. Compute the internal of return.

4. Compute the net present value of 10% discount rate.

5. Compute the profitability index.

Reference no: EM132955959

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