# The expected profits from an $80,000 investment are $15,000 in Year 1 and $20,000 in each of

## Question:

a. What is the investment’s payback period?

b. If the firm’s required payback period is four years, will it make the investment?

c. If the firm’s cost of capital is 14%, will it make the investment based on the NPV criterion?

Cost Of Capital

Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Payback Period

Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...

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