The most reliable explain your choice marks marks

The product would be sold for K20 per unit and forecast demand over the next five years is as follows:

After this period it is expectedthat demand will fall back below the point at which production would be viable and the equipment would therefore be sold for K 100,000.

• Other cost K 350, 000 per year

Depreciation policy

1. Calculate the accounting rate of return based on the average capital. (2 marks)

2. Calculate the payback period (2 marks)

6. Which one of the investment appraisal methods is, in your opinion , the most reliable? Explain your choice ( 2 marks).

Total (20 marks)