Question
ABC Inc. has gathered projected cash flows for a potential project. The required rate of return for the project is 13%. Using the NPV decision
ABC Inc. has gathered projected cash flows for a potential project. The required rate of return for the project is 13%. Using the NPV decision rule, should the firm accept the project? Why? Using the IRR decision rule, should the firm accept the project? Why? Using the payback period decision rule, should the firm accept the project, if the payback cutoff is 4.25 years? Why? Using the discounted payback period decision rule, should the firm accept the project, if the discounted payback cutoff is 4.75 years? Why? CF0 = -$400,000 CF1 = -$104,000 CF2 = -$106,000 CF3 = $220,000 CF4 = $337,000 CF5 = $392,000
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