1) Payback period

Sa

Net (Ex
Cash Depreciation Taxable on
Year Inflow Expense Income
0 (500,000)
1 50,000 (100,000) (50,000)
2 80,000 (160,000) (80,000)
3 120,000 (96,000) 24,000
4 200,000 (57,600) 142,400
5 240,000 (57,600) 182,400
6 300,000 (28,800) 271,200
7 270,000 - 270,000
8 240,000 - 240,000
9 120,000 - 120,000
10 40,000 - 40,000
Total (500,000) ######## (

Payback period in years

2) Average net income of the investment period

Book rate of return on intitial investment

Book rate of return on average investment

Book Value
Beginning of End of
Year the year Depreciation the year A
1 $ 500,000 $ 100,000 $400,000 $ 4
2 400,000 160,000 240,000 3
3 240,000 96,000 144,000 1
4 144,000 57,600 86,400 1
5 86,400 57,600 28,800
 6 28,800 28,800 -
7 -
8 -
9 -
10 -
Total $ 500,000 $1,1
Book rate of return

3) Net present value (NPV):

Present
Net After-tax 12% Value
Cash Discount of Net
Year Inflow Factor Cash Inflow
1 $ 65,000 0.893 $ 58,045
2 104,000 0.797 82,888
3 112,800 0.712 80,314
4 157,280 0.636 100,030
5 185,280 0.567 105,054
6 218,640 0.507 110,850
7 189,000 0.452 85,428
8 168,000 0.404 67,872
9 84,000 0.361 30,324
10 28,000 0.322 9,016
Total $729,821

NPV $229,821

or, NPV = $ 229,743 (difference is due to rounding)

4) Internal rate of return (IRR):

Present
Net After-tax 20% Value
Cash Discount of Net Di
Year Inflow Factor Cash Inflow F
1 $ 65,000 0.833 $ 54,145 0
 2 104,000 0.694 72,176 0
3 112,800 0.579 65,311 0
4 157,280 0.482 75,809 0
5 185,280 0.402 74,483 0
6 218,640 0.335 73,244 0
7 189,000 0.279 52,731 0
8 168,000 0.233 39,144 0
9 84,000 0.194 16,296 0
10 28,000 0.162 4,536 0
Total $527,875

PV of net cash inflows at 18%

PV of net cash inflows at 20%
Difference in PV with 2% difference in discount rate

Estimated Internal rate of return (IRR), based on interpolation =

Formula
or, IRR = 21.46% =IRR(O33:O43,0.12)