Question
Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of
Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 10 percent, and that the maximum allowable payback and discounted payback statistic for the project is four years, respectively.
Time: 0 1 2 3 4 5
Cash flow: 250 75 0 100 75 50
Compute the following and note whether the firm should accept or reject the project under each of the techniques: A. Payback period B. Discounted payback period C. Net present value D. Internal rate of return E. Profitability index
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