An investor wishes to borrow £50,000 from a bank at an effective rate of interest of 11% per annum

to finance an expansion of his business. The project is expected to generate net revenues of £8,800

per annum payable in arrears for the next 12 years.

(a) Find the discounted payback period for this project.

(b) Once the loan has been repaid, the investor can earn 4% per annum convertible monthly on

investing the revenues received. Find the total profit that the investor will make at the end

of the 12-year investment project.