Jam is considering a 5 year project with involves the following:  Initial investment in equipment of $540,000. Inventory and other working capital requirements of $20,000 are projected. 

Projected annual cash receipts on this project of $200,000 Projected annual cash expenses of $40,000 Major repairs [non-capital] of $20,000 would be required in year 3 The equipment is estimated to have a resale value of $25,000 at the conclusion of the project. Jam's cost of capital is 14%.

Required:

Calculate the NPV on this project.

Calculate the payback period on this project.

Answer rating: 100% (QA)

To calculate the Net Present Value NPV of the project and the payback period we need to consider the cash flows over the 5year period Lets break down ... View the full answer