A company is considering a proposal to invest $30,000 in a project that would provide the following net cash flows: $$\begin{array} { l r }
\text { Year 1 } & \$ 6,500 \
\text { Year 2 } & 10,700 \
\text { Year 3 } & 15,000 \
\text { Year 4 } & 12,800
\end{array}$$
(a) Compute the project's payback period.
(b) Compute the net present value of the project assuming a 10% discount rate with the following factors: PV factors for $1(yr 1: 0.9091; yr 2: 0.8264; yr 3:0 .7513; yr 4: 0.6830)
(c) Should the company invest in the machine? Why or why not?

Question

A company is considering a proposal to invest $30,000 in a project that would provide the following net cash flows: $$\begin{array} { l r } 
\text { Year 1 } & \$ 6,500 \
\text { Year 2 } & 10,700 \
\text { Year 3 } & 15,000 \
\text { Year 4 } & 12,800
\end{array}$$ 
(a) Compute the project's payback period.
(b) Compute the net present value of the project assuming a 10% discount rate with the following factors: PV factors for $1(yr 1: 0.9091; yr 2: 0.8264; yr 3:0 .7513; yr 4: 0.6830)
(c) Should the company invest in the machine? Why or why not?

Quizplus · Accepted Answer

The Answer of A company is considering a proposal to invest $30,000 in a project that would provide the following net cash flows: $$\begin{array} { l r } 
\text { Year 1 } & \$ 6,500 \
\text { Year 2 } & 10,700 \
\text { Year 3 } & 15,000 \
\text { Year 4 } & 12,800
\end{array}$$ 
(a) Compute the project's payback period.
(b) Compute the net present value of the project assuming a 10% discount rate with the following factors: PV factors for $1(yr 1: 0.9091; yr 2: 0.8264; yr 3:0 .7513; yr 4: 0.6830)
(c) Should the company invest in the machine? Why or why not?

A Company Is Considering a Proposal to Invest $30,000 in a Project