Question
DP Industries is considering a $6500 project which has the following cash flows Year Cash Flow 1 $2,000 2 3,000 3 3,000 4 1,500 a)
DP Industries is considering a $6500 project which has the following cash flows Year Cash Flow 1 $2,000 2 3,000 3 3,000 4 1,500
a) What is the payback period?
b) If cost of capital is .08, what is the NPV?
c) What is the IRR?
d) Name one disadvantage to IRR as a decision making method in capital budgeting.
e) Why might a manager or firm choose NOT to take on a positive NPV project? Be specific.
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