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What is the benefit-cost ratio of investment

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Capital Budgeting

The expected free cash flow from an investment is shown in the table below:

Year            Cash Flow

0                 $ (650,000.00)

1                    $ 50,000.00

2                    $ 175,000.00

3                      $ 250,000.00

4                       $ 250,000.00

5                      $ 200,000.00

The company's executives require a 12% return on all investments.

Problem a) What is the Payback Period of this investment?

Problem b) What is the Net Present Value of this investment?

Problem c) What is the Benefit-Cost Ratio (Profitability Index) of this investment?

Problem d) What is the Internal Rate of Return (IRR) of this investment?

Problem e) Based on the company's criterion, should it pursue this investment?

Reference no: EM132751299

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