Question: 1) Simple Payback 2) Discounted Payback 3) Net Present value 4) Internal Rate of Return 5) Profitability Index Initial Investment $20,000,000 Sale of Old Equipment
| 1) Simple Payback | ||||||
| 2) Discounted Payback | ||||||
| 3) Net Present value | ||||||
| 4) Internal Rate of Return | ||||||
| 5) Profitability Index | ||||||
| Initial Investment | $20,000,000 | |||||
| Sale of Old Equipment Net of Taxes | $500,000 | |||||
| Renovation of Space | $1,000,000 | |||||
| Sales | Variable | Fixed | ||||
| Units Sold | Price | Costs | Costs | Depreciation | ||
| Year 1 | 75,000 | $250 | $12,000,000 | $1,000,000 | $410,000 | |
| Year 2 | 100,000 | $250 | $16,000,000 | $1,000,000 | $410,000 | |
| Year 3 | 120,000 | $250 | $19,200,000 | $1,000,000 | $410,000 | |
| Year 4 | 105,000 | $250 | $16,800,000 | $1,000,000 | $410,000 | |
| Year 5 | 85,000 | $200 | $13,600,000 | $1,000,000 | $410,000 | |
| Tax Rate | 25.00% | |||||
| Required Rate of Return | 8.00% | |||||
| No Change in net Working Capital | ||||||
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