Question
8. The NPV and payback period What information does the payback period provide? Suppose Omni Consumer Productss CFO is evaluating a project with the following
8. The NPV and payback period
What information does the payback period provide?
Suppose Omni Consumer Productss CFO is evaluating a project with the following cash inflows. She does not know the projects initial cost; however, she does know that the projects regular payback period is 2.5 years.
| Year | Cash Flow |
|---|---|
| Year 1 | $325,000 |
| Year 2 | $450,000 |
| Year 3 | $475,000 |
| Year 4 | $425,000 |
If the projects weighted average cost of capital (WACC) is 10%, what is its NPV?
$317,112
$302,011
$347,313
$256,709
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Personal Financial Planning
Authors: Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk
14th edition
978-1305887725, 1305887727, 1305636619, 978-1305636613
