Comparison of approaches in capital budgeting. A company is considering a project that OO requires purchasing a particular asset. Data pertaining to the purchase are shown below.

REQUIRED 1. Determine the payback period in years. 2. Determine the present value of total recurring cash flows. 3. Determine the net present value of the project. 4. Do you estimate that the IRR of the project is higher or lower than 8%? 5. Do you accept the project?LO1

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Net initial investment to acquire the asset $400,000 Useful life of the acquired asset 5 years Recurring cash flow per year generated by the acquired asset $125,000 Required rate of return 8%