Builders Inc. is considering a project with an initial cost of $187,000 and expecting $36,000 in year 1; $53,000 in year 2; $76,000 in year 3; $35,000 in year 4; $0 in year 5 in cash flows. Assume that WACC is 18% and the beta for the company's stock is 1.8, and the firm wants to recover its initial investment in 6.75 years (or less). Based on relevant information, answer the questions below.

 

a) What is the payback period? Write out your equation(s) clearly and show your input(s).

 

b) Would the firm accept the project based on the payback period? Briefly explain why?

Answer rating: 100% (QA)

Builders Inc Project Analysis a Payback Period The payback period is the time it takes for the proje... View the full answer