What is the payback period?
Round your answer to two decimal places.
What is the net present value (NPV) rounded to the nearest dollar?
What is the internal rate of return?
Please show all work. Thank you.
Homework Answers
Cost = 2400000
In 3 years this project will generate 1850000.
Remaining amount to recover = 2400000 - 1850000 = 550000
Time required to recover remaining amount = 550000 / 900000 = 0.61
Payback Period = 3 + 0.61 = 3.61 years Answer
NPV = Present value of all future cash inflow - initial outlay
NPV = 780000/(1+0.178)^1 + 510000/(1+0.178)^2 + 560000/(1+0.178)^3 + 900000/(1+0.178)^4 - 2400000
NPV = -$560399.17 Answer
IRR is the rate for which NPV equals zero.
0 = 780000/(1+IRR)^1 + 510000/(1+IRR)^2 + 560000/(1+IRR)^3 + 900000/(1+IRR)^4 - 2400000
We will use heat and trial method to get that value for which above equation satisfy.
IRR = 5.52% Answer
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