# PQR Company

PQR Company is considering an investment in a piece of equipment that costs $25,000, has a useful life of four years, and generates annual savings net of taxes (i.e., ignore taxes for this problem) of $10,000 per year. Management uses a 14% discount rate for its minimum.

1. What is the NPV?

2. What is the Payback Period?

3. What is the Discounted Payback?

4. What is the approximate IRR?

5. What is the Profitability Index?

Here is my answer NVP which I think is incorrect. Not sure how to approach 2-5.

ANSWER

Interest rate / Discount 14%

Year 0 1 2 3 4

Cash flow (25,000) 10,000 10,000 10,000 10,000

PV factor 100% 88% 77% 67% 59%

PV of cash flow (25,000) 10,000 10,000 10,000 10000

Cumulative PV (25,000) (15,000) (5,000) 5,000 15,000

Net Present Value 15,000

https://brainmass.com/business/capital-budgeting/pqr-company-npv-251571

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