Inflation Rate

Inflation Rate of 1.5% was effected in the Cost of Sales in 2018 while 2% was effected in the
Cost of Sales in 2020 and 2021, respectively, however, the management agreed not to adjust the
selling price of the product despite the fact that the effect of the inflation of 1.5% and 2% 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 69%, while for the second year was 142%.
Further, the accounting rate of return for the 3 rd year and 4th year was 211% and 281,
respectively, as follows:

First Year
554,133.02
Accounting Rate of Return
800,000.00
Accounting Rate of Return 69%

Second Year
1,134,382.95
Accounting Rate of Return
800,000.00
Accounting Rate of Return 142%

Third Year
1,690,282.92
Accounting Rate of Return
800,000.00
Accounting Rate of Return 211%

Fourth Year
2,250,258.94
Accounting Rate of Return
800,000.00
Accounting Rate of Return 281%

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 800,000.00/1,195,558.02
Payback Period 8 months (estimated)
With the above payback period, the business is desirable for investment.