Tired of being a mediocre corporate lawyer, Cyril decides to pursue an education in accounting to boost his earning power. The education costs him $40,000 in year 0, and it will increase his after-tax labor income by $10,000 every year for the next 15 years. Cyril considers this education choice problem an investment project and uses a discount rate of 8%.

(a) What is the payback period of the project? 

(b) What is the NPV of the project?

(c) What is the IRR of the project?
(d) What is the profitability index of the project?

(e) What is the equivalent annual annuity of the project (EAA)?

Answer rating: 100% (QA)

a To calculate the payback period we need to find out how long it takes for Cyril to recoup the initial investment of 40000 Payback period Initial inv... View the full answer