NPV (Discount Rate, Range of Values) +investment
NPV (Discount Rate, Range of Values) +investment
NPV (Discount Rate, Range of Values) +investment
Discount rate 7%
so accept 1
RRR 5%
Given Solution
Year CF Year CF Balance
0 $ (270,000) 0 $ (270,000) $ (270,000)
1 $ 75,000 1 $ 75,000 $ (195,000)
2 $ 75,000 2 $ 75,000 $ (120,000)
3 $ 75,000 3 $ 75,000 $ (45,000)
4 $ 75,000 4 $ 75,000 $ 30,000
5 $ 75,000 5 $ 75,000 $ 105,000
r 11% a) PbP/ PB 3.60 3.60
way2 way1
Find
a) PbP/ PB ? c) Should the project be purchased?
b) DPbP/ DPB ?
c) Should the project be purchased?
payback period (DPB) for a project that costs
he firm's required rate of return is 11 percent.
ed?
Year CF PV of CF Balance
0 $ (270,000) $ (270,000) $ (270,000)
1 $ 75,000 $67,567.57 $ (202,432)
2 $ 75,000 $60,871.68 $ (141,561)
3 $ 75,000 $54,839.35 $ (86,721)
4 $ 75,000 $49,404.82 $ (37,317)
5 $ 75,000 $44,508.85 $ 7,192
years b) DPbP/ DPB 4.84 years