You are considering a project with an initial cash outlay of $80,000 and expected cash flows of

Question:

You are considering a project with an initial cash outlay of $80,000 and expected cash flows of $20,000 at the end of each year for six years. The discount rate for this project is 10 percent.

a. What are the project’s payback and discounted payback periods?

b. What is the project’s NPV?

c. What is the project’s PI?

d. What is the project’s IRR?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...