#1 Would you accept the project based on NPV, IRR? Would you accept the project based on Payback rule if project cut-off is 3 years?

#2 How would you explain to your CEO what NPV means?

#3 What are advantages and disadvantages of using only Payback method?

Investments 1) Equipment cost 2) Shipping and Install cost 3) Start up expenses Total Basis Cost (1+2+3) Total Initial Outlay Operations: Revenue 200,000 $ 210,000 S 220,500 $ 231,525 $(120,000) $ Operating Cost Depreciation (126,000) S (132,300) $ (138,915) 20,000 EBIT 4,200) 15,800 Taxes Net Income 60,000 Add back Depreciation Total Operating Cash Flow Terminal 1) Salvage value (after tax) Total Salvage Value Before Tax (1 -T $ 11,850 $ 11,850 11,850 Project Net Cash Flows 240,000 75,800 Payback 2 This numerical example I did in class shows ycu that so called Excel "NPV" function 150 100 Q#1 Would you accept the project based on NPV, IRR? Would you accept the project based on Payback rule if project cut-off is 3 years? actually computes PV, which can be wery misleading Taxthonk spreadsheet example 91P277 in 12th edition) also points out this error, which Microsot needs to fix ASAP 36 tha tavthnnk 91