Using the info below Prepare a cash flow statement and calculate payback period and accounting rate of return for a capital purchase of an office block. The directors have instructed that the purchase be self funded in 7 years:

Office block can be purchased for $1,500,000

Loan repayment $30,000pa

Rental income for the first year is expected to be $317,500
And will increase by 10% each year.

Outgoings will be $5,200 for the first year and also increase by 10% each year.

Insurance is to remain at $5,500 pa

Depreciation on the complex is allowed 2% pa

Company tax on profit 30% and paid in the same year as the income earned.