Tyler, Inc., is considering switching to a new production technology. The cost of the required equipment will be $3,727,533 . The discount rate is 12.86 percent. The cash flows that the firm expects the new technology to generate are as follows.Years CF0 $(3,727,533)1–2 03–5 $874,6676–9 $1,546,005a. Compute the payback and discounted payback periods for the project. b. What is the NPV for the project? Should the firm go ahead with the project?c. What is the IRR, and what would be the decision based on the IRR?

IRR is the rate at which NPV is Zero.

Answered: Tyler, Inc., is considering switching…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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Tyler, Inc., is considering switching to a new production technology. The cost of the required equipment will be $3,727,533 . The discount rate is 12.86 percent. The cash flows that the firm expects the new technology to generate are as follows.

Years		CF
0		$(3,727,533)
1–2		0
3–5		$874,667
6–9		$1,546,005

a. Compute the payback and discounted payback periods for the project.

b. What is the NPV for the project? Should the firm go ahead with the project?

c. What is the IRR, and what would be the decision based on the IRR?

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