(Payback, ARR, NPV) Tropic Investments is considering a project involving an initial cash outlay for an asset...

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(Payback, ARR, NPV) Tropic Investments is considering a project involving an initial cash outlay for an asset of $200,000. The asset is depreciated over five years at 20% per year (based on the value of the investment at the beginning of each year). The cash flows from the project are expected to be as follows:

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a. What is the payback period?

b. What is the return on investment (each year and average)?

c. Assuming a cost of capital of 10% and ignoring inflation, what is the net present value of the cash flows?

d. Should the project be accepted?

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Accounting For Managers Interpreting Accounting Information For Decision Making

ISBN: 9781118037966

1st Canadian Edition

Authors: Paul M. Collier, Sandy M. Kizan, Eckhard Schumann

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