Question
(a) The initial outlay or cost is $1, 000, 000 for a 4 year project. The respective future inflows for years 1, 2, 3 and
(a) The initial outlay or cost is $1, 000, 000 for a 4 year project. The respective future inflows for years 1, 2, 3 and 4 are $500, 000, $300, 000, $300, 000 and $300, 000. What is the payback period with discounting cash flows.
(b) Dweller Inc. is considering a four year project that has an initial after tax cost of $ 80, 000. The future cash inflows from its project are $40, 000, $40, 000, $30, 000, $30, 000 for years 1, 2, 3 and 4 respectively. Dweller uses the net present value (NPV) method and has a discount rate of 12%. Will Dweller accept the project?
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