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Payback period, IRR, and NPV

Yu-Ham has three investments proposal (not mutually exclusive). His company uses 13% annual rate to discount cash flow for NPV. Calculate payback period for each investment; Calculate IRR for each investment and calculate NPV for each investment.

Which investment should Yu-Ham take, why? (negative values in time zero). Below expected cash flow for each investment)

Year A B C
0 -500 -2000 -500
1 200 400 300
2 300 500 200
3 400 800 100
4 500 900
4 1000

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Payback period
Investment A Investment B Investment C
Year Cash inflows Cumulative cash inflows Cash inflows Cumulative cash inflows Cash inflows Cumulative cash inflows
Investment 500 2000 500
1 200 200 400 400 300 300
2 300 500 500 900 200 500
3 400 900 800 1700 100 600
4 500 1400 900 2600
5 1000 3600
Pay back period
For Investment A 2 years
For Investment C 2 years

For investment B payback period = 3 years +(Investment -cumulative cash flow in 3rd year)/ cash flow in 4th year = ...

Solution Summary

The following posting contains calculations of payback period, IRR, and NPV for 3 investments, provided in an Excel file.

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