Computation of payback period-discounted payback period

Reference no: EM13825830

Problem:

Consider an investment project where the net cash flows in years 1-5 respectively are as follows: $10,000, $20,000, $10,000, $40,000, $30,000. You are given that the initial investment is $20,000. Assume a discount rate of 10% per annum.

(a) Calculate the payback period.

(b) Calculate the discounted payback period.

(d) Calculate the profitability index (PI). Should the investment project be accepted or rejected? Why?

(e) Calculate the internal rate of return (IRR). Should the investment project be accepted or rejected? Why?

Additional Information:

This question basically belongs to Finance as well as it explains about computation of payback period, discounted payback period, net present value, profitability index as well as internal rate of return.

Reference no: EM13825830

Questions Cloud

Annual headline rate of inflation in australia : What is the annual headline rate of inflation in Australia to the end of the March, 2010, quarter? If a 12 month fixed term deposit currently earns 6% per annum interest, what is the real rate of return?

Computation of payback period-net present value : Consider two mutually exclusive investment projects, project A and project B. You are given project A has an expected life of 3 years and project B has an expected life of 9 years.

Manufacturing overhead on the manufacturing overhead budget : The manufacturing overhead budget at Cardera Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 8,700 direct labor-hours will be required in January. The variable overhead rate is $9.30 per direct labor-hour. ..

Cash discount versus loan : Cash Discount Versus Loan: Joanne Germano works in an accounts payable department of a major retailer. She has attempted to convince her boss to take the discount on the 1/15 net 65 credit terms most suppliers offer, but her boss argues that giving u..

Computation of payback period-discounted payback period : Consider an investment project where the net cash flows in years 1-5 respectively are as follows: $10,000, $20,000, $10,000, $40,000, $30,000. You are given that the initial investment is $20,000. Assume a discount rate of 10% per annum.

Calculate the firms cash conversion cycle : American products is concerned about managing cash efficiently. On average, inventories have an age of 90 days, and accounts receivable are collected in 60 days. Calculate the firm's operating cycle. Calculate the firm's cash conversion cycle. Calcul..

Review and reflect on the terrorist goals and stereotypes : What were the most compelling points from the interaction with your fellow students - How did participating in this discussion help in your understanding of the Discussion Board task?

Manufacturing overhead costs represent current cash flow : The manufacturing overhead budget at Latronica Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,800 direct labor-hours will be required in August. The variable overhead rate is $8.10 per direct labor-hour...

Comparison of performance of shares of a company : The market leader on the Australian share market, by market capitalization, is the company BHP Billiton Limited.

User Account

All Pages