An investment alternative in a project needs a capital cost of $72 millions finished at time zero. The investment will form a stream of revenue of $50 million per year end over a six year period with the operating costs of $20 million per year end for the first 3 years and $25 million per year end for the remaining 3 years. Use straight line depreciation for the capital cost over the project period. The rate of taxation on the income is 40%.
a. Make the cash flow table, determine the after-tax annual cash flows, and calculate the payback period;
b. Determine the present worth and rate of return for this project.