Question
The following are cash flows for an investment: Initial outlay: $7,000 Year 1: $2,000 Year 2: $2,000 Year 3: $2,500 Year 4: $3,000 Year 5:
The following are cash flows for an investment:
•Initial outlay: $7,000
•Year 1: $2,000
•Year 2: $2,000
•Year 3: $2,500
•Year 4: $3,000
•Year 5: $3,000
The discount rate is 7%.
Requirements:
1.Compute the NPV.
2.Calculate the payback period.
3.Determine the Profitability Index (PI).
4.Evaluate the IRR.
5.Assess the effect of a change in the initial outlay to $8,000.
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
