# Compute the NPV, IRR, and payback period

1)

Investment criteria) Compute the NPV, IRR, and payback period for the following investment.

The cost of capital is 10%.

Year 0 1 2 3

Cash flow - 200,000 100,000 100,000 150,000

2)

(Cash flows and NPV for a new project) Syracuse Roadbuilding Company is considering

the purchase of a new tandem box dump truck. The truck costs $95,000, and an additional

$5,000 is needed to paint it with the firm logo and install radio equipment. Assume the

truck falls into the MACRS three-year class. The truck will generate no additional revenues,

but it will reduce cash operating expenses by $35,000 per year. The truck will be

sold for $40,000 after its five-year life. An inventory investment of $4,000 is required during

the life of the investment. Syracuse Roadbuilding is in the 45% income tax bracket.

a. What is the net investment?

b. What is the after-tax net operating cash flow for each of the five years?

c. What is the after-tax salvage value?

d. Assuming a 10% cost of capital, what is the NPV of this investment?

https://brainmass.com/business/capital-budgeting/compute-the-npv-irr-and-payback-period-402455

#### Solution Summary

The solution computes the NPV, IRR, and payback period.