1. What would be your recommendation based on the net present value method (NPV)? Use the table below to calculate NPV.

10%	Cashflow	PV factor	Present value
Year 0	(320,000)	1	320,000
Year 1	10,000	0.909	9,090
Year 2	80,000	0.826	66,080
Year 3	140,000	0.751	105,140
Year 4	120,000 + 80,000 = 200,000	0.683	136,600
NPV			316,910 320,000 = (3,090)
Decision? Why? What is your final recommendation to the manager of the company? Why?

1. What would be your recommendation based on the payback period? Calculate the payback period in years (round to 2 decimal places).

Payback period = $320,000 - $10,000 - $80,000

= $230,000

= $230,000 / $140,000

= 1.643 x 12

= 19.72 months

2 years and 19.72 months > 3 years therefore cannot accept investment.

Recommendation? Why?

The required rate of return of the company is 10% and the maximum payback period acceptable for the company is 3 years. However, the actual payback period is 30%, and in 2 years and 19.72 months (3.6 years). It can be seen the payback period as shown in the above calculation is too long. This will affected directly to all the cash inflow (less profitable short-term investment).

Therefore, I would recommend