Question
You are evaluating an investment project costing $11,100 initially. The project will provide $3,000 in after-tax cash flows in the first year and $5,000 each
You are evaluating an investment project costing $11,100 initially. The project will provide $3,000 in after-tax cash flows in the first year and $5,000 each year thereafter for 4 years. The maximum payback period for your company is 3 years.
Your company's cost of capital is 13%.
1. What is the payback period for this project?
2. Should your company accept this project based on the payback period criterion?
3. What is the discounted payback period for this project?
4. Should your company accept this project based on the discounted payback period criterion?
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