A project requires an initial investment of $225,000 and is expected to generate the following net cashinflows:Year 1: $95,000Year 2: $80,000Year 3: $60,000Year 4: $55,000Required: Compute net present value of the project if the minimum desired rate of return is 12%.Calculate the following:Payback PeriodNPVIRR

Information Provided: Initial Investment = $225,000 Year 1 CF = $95,000 Year 2 CF = $80,000 Year 3…

Answered: Calculate the following: Payback Period…

Business

Finance

Calculate the following: Payback Period NPV IRR

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

A project requires an initial investment of $225,000 and is expected to generate the following net cash
inflows:
Year 1: $95,000
Year 2: $80,000
Year 3: $60,000
Year 4: $55,000
Required: Compute net present value of the project if the minimum desired rate of return is 12%.
Calculate the following:
Payback Period
NPV
IRR

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