Revenues Advertisement Salaries Sale of scrape Year 1 Year 2 100000 150000 4000 5000 20000 30000 Year 3 140000 3000 30000 5000 Year 4 110000 30000 Year 5 150000 35000 2000 Initial Investment Rs.200000 required rate of return on investment is 12% Required: (i) NPV, (ii) IRR and (iii) Payback period, and (iv) Discounted Payback Period.

Suppose the MARR is 12%. Use the following table to answer the question--The IRR on the CMS Investment is CMS FMS Initial Investment Annual Revenue Useful Life (Years) A. 17.0% - 18.0% B. 20.0% - 21.0% C. 15.0% - 16.0% D. 0.5% -1.0% E. 11.0% - 12.0% $20,000 6,688 15 $29,000 9,102 in 5

Project A has the following estimated cash flows and present values:Year                        Cash flow $       Discount factor@ 12%       Present value $0   Cost                    (95 000)          1.0                                         (95 000) 1–5 Contributionper annum               50 000             3.605                                    180 250 1–5 Fixed costsper annum               (25 000)           3.605                                    (90 125) 5 Residual value       20 000             0.567                                    11 340   The benefit of using sensitivity analysis in an investment appraisal would be:

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Payback period and discounted payback period (Using 5% Rate of Return) Initial investment is 600,000

Determine the modified B/C ratio for the following information at 8% interest per year. Cost Component Initial Investment M & O cost Benefits Disbenefits 0.55 1.15 1.80 4.65 Estimated cost $16,000 $1,000 years 1-5 $1,500 years 6-10 $8,000 per year $2,500 per year

Calculate the Payback period (PBP) and Profitability Index (PI) of the investment and state the Pro’s and Cons of this method The annual incremental profits/ (losses) relating to the investment are estimated as follows:                                                               Years CF’s        (000) Year 0 -175,000 Year 1 K11,000 Year 2 K3,000 Year 3 K34,000 Year 4 K47,000 Year 5 K8,000 Investment at the start of the project would be K175, 000,000.the investment sum assuming nil disposal value after five years, would be written off using the equal instalment method. The depreciation has been included in the profit estimates above, which should be assumed to arise at each year end. Assume the cost of Capital is 12%   Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 D.f 1.00 0.893 0.797 0.712 0.636 0.567