The expected profits from an $80,000 investment are $15,000 in Year 1 and $20,000 in each of

Question:

The expected profits from an $80,000 investment are $15,000 in Year 1 and $20,000 in each of Years 2 to 7.
a. What is the investment’s payback period?
b. If the firm’s required payback period is four years, will it make the investment?
c. If the firm’s cost of capital is 14%, will it make the investment based on the NPV criterion?

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