Question
Problem 8-27 NPV, Payback (LO1, LO4) A project that costs $3,000 to install will provide annual cash flows of $650 for the next 6 years.
Problem 8-27 NPV, Payback (LO1, LO4)
A project that costs $3,000 to install will provide annual cash flows of $650 for the next 6 years. The firm accepts projects with payback periods of less than 4 years.
a. What is this project's payback period? (Round your answer to 3 decimal places.)
b. Will the project be accepted?
c-1. What is project NPV if the discount rate is 2%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
c-2. Should this project be pursued?
d-1. What is project NPV if the discount rate is 11%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
d-2. Should this project be pursued?
e. Will the firms decision change as the discount rate changes?
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