Question
Consider an investment that costs $100,000 and has a cash inflow of $25,000 every year for 5 years. The required return is 9% and required
Consider an investment that costs $100,000 and has a cash inflow of $25,000 every year for 5 years. The required return is 9% and required payback is 4 years.
- 1.What is the payback period?
- What is the NPV?
- What is the IRR?
- Should we accept the project?
- What decision rule should be the primary decision method?
- When is the IRR rule unreliable?
Step by Step Solution
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Step: 1
1 Payback period Year Cash flows Cumulative Cash flows 0 100000 100000 1 25000 75000 2 25000 50...
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Step: 2
Step: 3
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Money Banking and Financial Markets
Authors: Stephen Cecchetti, Kermit Schoenholtz
4th edition
007802174X, 978-0078021749
