Question: A store is considering carrying a new product which will require an upfront purchase of $125,000 for inventory. Free cash flows expected as a result
- A store is considering carrying a new product which will require an upfront purchase of $125,000 for inventory. Free cash flows expected as a result of this project are shown below. At the end of the final year shown, the company plans to stop selling this product and sell off the excess inventory to a discount retailer for $5,000. The company has a 12% cost of capital (i.e., the required rate of return is 12%). What is the payback period of this proposal (measured in years)?
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Initial Investment | 60,000 | 40,000 | 30,000 | 20,000 | 10,000 |
Enter your answer as a number rounded to four decimal places. For example, if your answer is 90.1234 years, enter 90.1234
2. A store is considering carrying a new product which will require an upfront purchase of $125,000 for inventory. Free cash flows expected as a result of this project are shown below. At the end of the final year shown, the company plans to stop selling this product and sell off the excess inventory to a discount retailer for $5,000. The company has a 12% cost of capital (i.e., the required rate of return is 12%). What is the internal rate of return of this proposal?
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Initial Investment | 60,000 | 40,000 | 30,000 | 20,000 | 10,000 |
Enter your answer as a percentage rounded to two decimal places, but without the percent symbol. For example, if your answer is 90.1234%, enter 90.12 If you have a negative result, enter a negative number.
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