What information does the payback period provide? Suppose you are evaluating a project with the expected...

Transcribed Image Text:

What information does the payback period provide? Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project's net present value (NPV). You don't know the project's initial cost, but you do know the project's regular, or conventional, payback period is 2.50 years. Year Cash Flow Year 1 $275,000 Year 2 $500,000 Year 3 $500,000 Year 4 $450,000 If the project's weighted average cost of capital (WACC) is 8%, the project's NPV (rounded to the nearest dollar) is: $385,979 O $424,577 $463,175 O $405,278 for capital What information does the payback period provide? Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project's net present value (NPV). You don't know the project's initial cost, but you do know the project's regular, or conventional, payback period is 2.50 years. Year Cash Flow Year 1 $275,000 Year 2 $500,000 Year 3 $500,000 Year 4 $450,000 If the project's weighted average cost of capital (WACC) is 8%, the project's NPV (rounded to the nearest dollar) is: $385,979 O $424,577 $463,175 O $405,278 for capital