Question

Biddiyah IT Solutions Co. is considering purchasing a new wireless network for its main office. The new system will require several machines, equipment and wiring and will need an initial investment of OMR 200,000 in year 0 and another investment of OMR 150,000 in year 1. The after-tax cash inflows are: OMR 250,000 (year 2), OMR 300,000 (year 3), OMR 350,000 (year 4), and OMR 400,000 (year 5 and each year up to year 8).

 

Find:

a. The Net Present Value (NPV) assuming the required rate of return is 15%.

b. The Payback Period (PBP).

c. Should the project be accepted? Why?

Answer 1