Paladin Ltd requires 11% pa required rate of return and has a required payback period of 2 years. Paladin is considering a new project that will cost $60,000 and provide the following expected after tax cash flows. (Cash flows occur at the end of each year.)

End of Year             Cash flow of Project ($)            

1                              20,000

2                              30,000

3                              15,000

4                              12,000

a.Calculate the Net Present Value (NPV) of the Project. 

b.Calculate the Present Value Index or benefit/cost ratio of the Project.                                

c.Recommend under each criterion and overall if Paladin should accept the project or not.

Answer rating: 100% (QA)

SOLUTION a To calculate the net present value NPV of the project we need to discount each cash flow ... View the full answer