Purchase Solution

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

Not what you're looking for?

Ask Custom Question

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?

Purchase this Solution
Solution Summary

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

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 ...

Purchase this Solution
Free BrainMass Quizzes
Motivation

This tests some key elements of major motivation theories.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

View More Free Quizzes
Related BrainMass Solutions

  • Discounted Payback, IRR

    Discounted Payback Period Payback period is the number of years in which the initial investment is recouped Payback Period = Year before full recovery + (unrecovered cost at start of year/Cash Flow during year)

  • Capital budgeting

    In the discounted payback method, we discount the cash flows using the discounting rate given and then use these discounted cash flows to calculate the time period needed to recover the initial investment.

  • Calculation of various items for two corporations

    A project with a higher IRR is preferable to a project with lower IRR. Corporation B with higher IRR is better. Payback period gives us the time taken to recover the initial investment.

  • Project Valuation and Analysis

    /Initial investment required) 1.01 IRR, payback period, discounted payback period and profitability index for a project are worked out in Excel.

  • What are the various financial tools used to evaluate capital projects?

    our targeted discount payback period: Accept the project If payback period is less then our targeted payback period: Accept the project If profitability index is more then the one: Accept the project Reference: ?

  • Calculating various capital budgeting parameters

    What is the Payback Period, Discounted Payback Period, NPV, IRR, and MIRR for this investment?

  • Comparing IRR and the NPV of Different Projects

    As the NPV of Project B is higher than project A. Also IRR is higher than Project A. If we see the payback period and discounted payback, the Project B is better as the outflows will be received quickly than in case of Project A.

  • Answer to student's question about: Capital Budgeting

    Payback is the time taken to recover the initial investment. Payback period for A is 6,000/2,000=3 years Payback period for B is 18,000/5,600=3.21 years In discounted payback we use the discounted cash flows.

  • Payback methods, IRR, and Right Discount Rate

    With such a long payback period, is the bond a bad investment? c. What is the discounted payback period for the bond, assuming its 4 percent coupon rate is the required return?

View More Related Solutions