Upper management is reviewing the net cash flows for the solar power generation project and would like
Question:
Upper management is reviewing the net cash flows for the solar power generation project and would like to know what year payback is estimated to occur. Wile-IT uses a MARR of 35% and has provided the net cash flows before financing as shown in the following table.
(a) Use the discounted payback method for the payback analysis. If payback does not happen within the duration of the project, they would like a projection of when it may take place. Construct a table depicting the calculations and a graph showing the cumulative discounted cash flow versus period along with identifying n*.
(b) Since the option to finance the project with an amortized loan is available, calculate the payback period using the cost-of-funds adjusted payback method with a borrowing cost of 8.25% per year. If payback does not happen within the duration of the project, they would like a projection of when it may take place. Construct a table depicting the calculations and a graph showing the cost-of-funds balance versus period along with identifying n*.
Auditing and Assurance Services
ISBN: 978-0077862343
6th edition
Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Straws