Calculate the payback period for aa company

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Reference no: EM132692525

AA Company is considering a new product line to supplement its range line. It is anticipated that the new product line will involve a cash investment of ETB 3,000,000 at time zero(initial) and ETB 2,000,000 in year 1, ETB500,000 in year 2, ETB 600,000 in year 3, ETB 800,000 in year 4.

Calculate the payback period

Question a) If the required rate of return is 10%, what is the net present value (NPV) of the project? Is it acceptable? Why?

Question b) What is its internal rate of return (IRR)?Is it acceptable? Why?

Question c) What would be the case if the required rate of return is 5%? (calculate NPV) and comment on it)

Reference no: EM132692525

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