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discount rate 12% QUESTION 2 11 marks PAYBACK PERIOD THECHNIQUE Using payback period method RAK expects to recover its initial investment of $110,000 in three
discount rate 12%
QUESTION 2 11 marks PAYBACK PERIOD THECHNIQUE Using payback period method RAK expects to recover its initial investment of $110,000 in three (3) years. a) Compute the payback period for this investment. 3marks b) Would you be willing to invest in this project using payback method? 3 marks c) Using both NPV and payback period methods, would you be willing to invest in this project? Why? Why not? Please explain. 3 marks d) What role does diversification play in capital investment? Explain. 2 marks The plant and equipment will cost $110,000. RAK expects to receive the following net cash flows in the next five years. NET CASH FLOWS YEAR $ 1 10,000 2 30,000 3 50,000 10,000 4 5 60,000 Step by Step Solution
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