Question
Payback, NPV, and IRRRieger International is evaluating the feasibility of investing $100,000 in a piece of equipment that has a 5-year life. The firm has
Payback, NPV, and IRRRieger International is evaluating the feasibility of investing $100,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table:
Year Cash Inflows
1 25,000 2 40,000 3 40,000 4 20,000 5 40,000
The firm has a 8% cost of capital.
a.Calculate the payback period for the proposed investment in years.
b.Calculate the net present value (NPV) for the proposed investment.
c.Calculate the internal rate of return (IRR), rounded to the nearest whole percent, for the proposed investment.
d.Accept or Reject?
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Small Business Management Launching and Growing New Ventures
Authors: Justin Longenecker, Leo Donlevy, Terri Champion, William Petty, Leslie Palich, Frank Hoy
6th Canadian edition
176532218, 978-0176532215
