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# Payback period for each project

How large are the monthly payments of a recent, college graduate with \$35,000 in student loans, if the payments are to be made for 10 years and the annual interest rate on the loans is 6.0%?

What amount would you accumulate if you paid \$500 at the end of every quarter for 25 years, earning an annual percentage rate of 8%?

What is the present value of \$500 to be received at the end of each year for 10 years if your required rate of return is 10%?

Tom invested \$3,000 twenty years ago and now has \$20,182 in his account. What annual rate of return has Tom earned over the twenty-year period?

The following net cash flows are projected for two separate projects. Your required rate of return is 12%.

Year Project A Project B
0 (\$150,000) (\$400,000)
1 \$30,000 \$100,000
2 \$30,000 \$100,000
3 \$30,000 \$100,000
4 \$30,000 \$100,000
5 \$30,000 \$100,000
6 \$30,000 \$100,000

a. Calculate the payback period for each project.
b. Calculate the NPV of each project.
c. Calculate the IRR of each project.
d. Which project(s) would you accept and why?

#### Solution Preview

How large are the monthly payments of a recent, college graduate with \$35,000 in student loans, if the payments are to be made for 10 years and the annual interest rate on the loans is 6.0%?

What amount would you accumulate if you paid \$500 at the end of every quarter for 25 ...

#### Solution Summary

This provides the steps to calculate the payback period for each project

\$2.19