Calculate for a company's CFO, key financial metrics for this capital budgeting project. These key metrics must include payback period, net present value, internal rate of return and modified rate of return for a proposed capital budgeting project. Describe what each of these metrics tells us.
Key Financial Data for BCD Company Project
Project's discount rate 10%
Time Period (in years)
Cash out ($10,000)
Cash in $7,500 $7,500 $7,500
- assume cash flows occur at the beginning of the period
(year 1 cash flow occurs 12 months after the initial investment)
Can you explain this to me in layman's terms so that I may understand the concept.
The solution calculates key financial metrics ( payback period, net present value, internal rate of return and modified rate of return) for a capital budgeting project and describe what each of these metrics is.