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**FIN 370 Week 4 Chapter 11-24**

11–24. (Payback period, net present value, profitability index, and internal rate of return

calculations) You are considering a project with an initial cash outlay of $80,000 and

expected cash flows of $20,000 at the end of each year for six years. The discount rate

for this project is 10%.

a. What are the project’s payback and discounted payback periods?

b. What is the project’s NPV?

c. What is the project’s PI?

d. What is the project’s IRR?

11–24.

Payback period, net present value, profitability index, and internal rate of return

calculations) You are considering a project with an initial cash outlay of $80,000 and

expected cash flows of $20,000 at the end of each year for six years. The discount rate

for this project is 10%.

a. What are the project’s payback and discounted payback periods?

b. What is the project’s NPV?

c. What is the project’s PI?

d. What is the project’s IRR?

Solution Description

Payback Period = $80,000/$20,000 = 4 years

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