Payback period-npv and profitability index

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(no excel and must show formulas)

Given the following cash flows for Klingman’s, and a required return (cost of capital, risk-adjusted-discount-rate) of 13%, answer the questions below. The firm requires its projects to recover the initial investment within 3 years.

0 Initial Outlay ($95,000)

1 OCF1 35,000

2 OCF2 35,000

3 OCF3 35,000

4 OCF4 35,000

5 OCF5 44,000

Questions:

a. Payback period

b. NPV

c. Profitability index

d. Internal rate of return

e. Should the firm invest in this project? Why or why not? You must give specific reasons based on all of your calculations.

Reference no: EM131347323

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