A project has the following cash flow with a discount rate of 12%: Annual cash flows: Year 0 $ Year 1 $ Year 2 $ Year 3 $ Year 4 $ $520,000 is used in purchasing an equipment for the project only. -520,000 170,000 210,000 225,000 195,000 Compute the following: A. Payback period; B. Discounted Payback period; C. NPV; D. Profitability Index; E. Average Accounting Return, assuming that the cash flow shown is the income before tax and depreciation and ignoring the tax effects. F. Should the project be accepted. Explain.

Net present value is the most important concept of finance. It is used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. The difference between the present value of cash inflow and cash outflow is…

The term investment refers to allocating money with the intention of getting positive returns in the future period. For example, an asset would be acquired with the motive of generating income by selling the asset when there is a price increase.

Capital investment analysis is a way of the budgeting process that companies and the government use to evaluate the profitability of the investment that has been done for the long term. This can include the evaluation of fixed assets such as machinery, e…

Capital budgeting is a decision-making process whereby long-term investments is evaluated and selected based on whether such investment is worth pursuing in future or not. It plays an important role in financial decision-making as it impacts the profitab…