Inflation Rate

Inflation Rate of 2% was effected in the Cost of Sales in 2019 while 1.5% was effected in the
Cost of Sales in 2020, however, the management agreed not to adjust the selling price of the
product despite the fact that the effect of the inflation of 2% and 1.5% will decrease the income
of the partnership.

Accounting Rate of Return

The accounting rate of return (ARR) is the amount of profit, or return, an individual can expect
based on an investment made.

The accounting rate of return for the first year was 93%, while for the second year was 157%.
Further, the accounting rate of return for the 3rd year was 223% as follows:

First Year
747,565.86
Accounting Rate of Return
800,000.00
Accounting Rate of Return 93%

Second Year
1,257,442.20
Accounting Rate of Return
800,000.00
Accounting Rate of Return 157%

Third Year
1,785,225.22
Accounting Rate of Return
800,000.00
Accounting Rate of Return 223%

Payback Period
The payback period (PB) is the length of time required to recover the cost of an investment. The
payback period of a given investment or project is an important determinant of whether to
undertake the position or project, as longer payback periods are typically not desirable for
investment.

The payback period of the business is estimated at 8 months, computed as follows:

Investment
Payback Period Annual Net Cash
Inflow
Payback Period 800,000.00/1,258,341.66
Payback Period 8 months (estimated)

With the above payback period, the business is desirable for investment.