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Apple investment project

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Use the following information to answer questions 20 - 22:

Apple has gathered the following data on a proposed investment project:

Cost of the Investment $1,200,000
Estimated Salvage Value $0
Annual cost inflows $240,000
Life of the project 10 years
Discount rate 10%

Calculate the following:

20. What is the payback period for the investment?
21. What is the simple rate of return on the investment?
22. What is the net present value of the investment? Should the proposal be accepted? Why or why not?

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Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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  • "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
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