Initial investment K2,100,000

Cashflows

Year 1 : K600,000

Year 2 : K800,000

Year 3 : K750,000

Year 4: K900,00

Year 5: K1,200,00

Company's Required return is 15%. Maximum payback 3 ½ year.

Required

1. Determine payback period, is it acceptable to company
2. Calculate NPV. Should company proceed based on NPV
3. Calculate IRR for this project. Based on IRR should we accept or reject
4. Calculate Profitability Index (PI). Interpret PI and should project be taken
5. Discuss any 2 advantages of payback

Answer rating: 100% (QA)

Calculations Payback Period Year 1 Cash Inflow K600000 Year 2 Cash Inflow K800000 Year 1 Year 2 K600... View the full answer