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    Investment project: payback period, discounted, NPV, IRR.

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    Consider an investment that costs $100,000 and had a cash inflow of $25,000 every year for 5 years. The required return is 9% and required payback is 4 years.

    Wwhat is the payback period?
    What is the discounted payback period?
    What is the NPV?
    What is the IRR?

    Should we accept this project?
    What decision rule should be the primany decision method?
    When is the IRR rule unreliable?

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    Solution Preview

    What is the payback period?
    Undiscounted CFs
    t0 = -100000
    t1 = 25000
    t2 = 25000
    t3 = 25000
    t4 = 25000
    t5 = 25000

    Payback period = 4 years

    What is the discounted payback period?
    t0 = -100000
    t1 ...

    Solution Summary

    This assignment discusses the payback period, discounted payback period, NPV and IRR for a project.