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A firm considers an investment whose cost is $ 3 000 000 which is paid in 2020. The expected cash flows from this investment are
A firm considers an investment whose cost is $ 3 000 000 which is paid in 2020. The expected cash flows from this investment are as follows:
2021 $ 500 000
2022 $ 700 000
2023 $ 1 000 000
2024 $ 1 000 000
2025 $ 800 000
2026 $ 600 000
a) What is the exact payback period of that investment according to the discounted payback method if the relevant discount rate for that investment is 14%
b) Should the firm accept or reject this investment if the desired payback period of the investment is 3 years.
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