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    Payback period, IRR, and NPV

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    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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    https://brainmass.com/business/capital-budgeting/payback-period-irr-and-npv-196124

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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.

    $2.19

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