A second project considered by the company has a 5 year life with an initial investment of

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A second project considered by the company has a 5 year life with an initial investment of $340,000 is expected to have an after-tax cash flow of $70,000 per year for the first 2 years, $90,000 per year for the next 2 years and $150,000 for the 5th year. Assume the company has a 10% required rate of return. The company seeks to recover all of its costs on a project in 5 years or less. Calculate the following for the company:

a. Payback Period

b. Discounted Payback Period

c. Net Present Value

d. Modified Internal Rate of Return- If your calculator does not have a MIRR function key, work until the final ratio computation.

e. Would you buy the machine? Provide a comprehensive answer addressing each evaluation method?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...

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a Payback period This is the number of period required to recover the initial investments Year Net c...View the full answer

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Asim farooq

I have done MS finance and expertise in the field of Accounting, finance, cost accounting, security analysis and portfolio management and management, MS office is at my fingertips, I want my client to take advantage of my practical knowledge. I have been mentoring my client on a freelancer website from last two years, Currently I am working in Telecom company as a financial analyst and before that working as an accountant with Pepsi for one year. I also join a nonprofit organization as a finance assistant to my job duties are making payment to client after tax calculation, I have started my professional career from teaching I was teaching to a master's level student for two years in the evening. My Expert Service Financial accounting, Financial management, Cost accounting, Human resource management, Business communication and report writing. Financial accounting : • Journal entries • Financial statements including balance sheet, Profit & Loss account, Cash flow statement • Adjustment entries • Ratio analysis • Accounting concepts • Single entry accounting • Double entry accounting • Bills of exchange • Bank reconciliation statements Cost accounting : • Budgeting • Job order costing • Process costing • Cost of goods sold Financial management : • Capital budgeting • Net Present Value (NPV) • Internal Rate of Return (IRR) • Payback period • Discounted cash flows • Financial analysis • Capital assets pricing model • Simple interest, Compound interest & annuities

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Related Book For book-img-for-question

Principles of managerial finance

ISBN: 978-0132479547

12th edition

Authors: Lawrence J Gitman, Chad J Zutter

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Question Posted: Jan 10, 2018 01:37 AM

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A second project considered by the company has a 5 year life with an initial investment of

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a Payback period This is the number of period required to recover the initial investments Year Net c...View the full answer

Principles of managerial finance

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