Chow Company has gathered the following data on a proposed investment project: Investment required in equipment ......................................$142,500

Question:

Chow Company has gathered the following data on a proposed investment project:

Investment required in equipment ......................................$142,500

Annual cash inflows ............................................................$30,000

Salvage value................................................................................$0

Life of the investment ............................................................8 years

Required rate of return ...............................................................10%

a. The payback period for the investment is

b. The net present value on this investment is

c. The internal rate of return on the investment

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...