# Workshop | My Assignment Tutor

Workshop CIA I Year Project A Project B Project C 0 (2500) (2000) (3000) 1 600 800 800 2 800 500 500 3 1000 600 800 4 200 1000 600 Required: Calculate the payback period for the three projectsCalculate the accounting rate of return for the three projects. Solutions to Workshop CIA I Calculate the payback period for the three projects Year Project A Cumulative CF 0 (2500) 1 600 600 2 800 1400 3 1000 2400 4 200 2600 Payback period for project A: 3 years + (2500-2400)/200 =3.5 years Year Project B Cumulative CF 0 (2000) 1 800 800 2 500 1300 3 600 1900 4 1000 2900 Payback period for project B: 3 years + (2000-1900)/1000 =3.1 years Year Project C Cumulative CF 0 (3000) 1 800 800 2 500 1300 3 800 2100 4 600 2700 Payback period for project C: No payback period Calculate the accounting rate of return for the three projects. Year Project A Depreciation annual profits 0 (2500) 1 600 (625) (25) 2 800 (625) 175 3 1000 (625) 375 4 200 (625) (425) Accounting rate of return for project A: [(-25+175+375-425)/4]/(2500/2)=2% OR [(600+800+1000+200-2500)/4]/(2500/2)=2% Year Project B Depreciation annual profits 0 (2000) 1 800 (500) 300 2 500 (500) 0 3 600 (500) 100 4 1000 (500) 500 Accounting rate of return for project B: [(300+0+100+500)/4]/(2000/2)=22.5% OR [(800+500+600+1000-2000)/4]/(2000/2)=22.5% Year Project C Depreciation annual profits 0 (3000) 1 800 (750) 50 2 500 (750) (250) 3 800 (750) 50 4 600 (750) (150) Accounting rate of return for project C: [(50-250+50-150)/4]/(3000/2) = -5% OR [(800+500+800+600-3000)/4]/(3000/2) = -5%

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