NPV and Investment Appraisal Question 1: Cost of machine = 600,000 Annual income streams from investment = 255,000 per year Compute Payback Period Question 2: An investment is expected to yield cash flows of 10,000 annually for the next 5 years The initial cost of the investment is 20,000 Compute Accounting Rate of Return Question 3: Project A costs 1,000,000 After 5 years the cash returns = 100,000 (10%) If you had invested the 1 million into a bank offering interest at 12% the returns would be greater You might be better off re-considering your investment 1- Compute PV 2- Compute NPV for PV of 500 in 10 years time at a rate of interest of 4.25%