A project that costs $1,900 to install will provide annual cash flows of $520 fo

Question

A project that costs $1,900 to install will provide annual cash flows of $520 for the next 5 years. The firm accepts projects with payback periods of less than 3 years.

a-1. What is this project's payback period? (Round your answer to 3 decimal places.) Payback period years

What is project NPV if the discount rate is 2%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

What is project NPV if the discount rate is 12%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

What is project NPV if the discount rate is 2%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

What is project NPV if the discount rate is 12%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Explanation / Answer

PBP Time Amount Cumulative                                                                                       -   (1,900.00) (1,900.00)                                                                                  1.00         520.00 (1,380.00)                                                                                  2.00         520.00       (860.00)                                                                                  3.00         520.00       (340.00)                                                                                  4.00         520.00         180.00                                                                                  5.00         520.00         700.00 PBP= 3 + 340/520 PBP= 3.65 Years Approx Reject since mpre than 3 years Statement showing Cash flows Particulars Time PVf@2% Amount PV Cash Outflows                  -                1.00                           (1,900.00)                           (1,900.00) PV of Cash outflows                           (1,900.00) Cash inflows              1.00         0.9804                                 520.00                                 509.80 Cash inflows              2.00         0.9612                                 520.00                                 499.81 Cash inflows              3.00         0.9423                                 520.00                                 490.01 Cash inflows              4.00         0.9238                                 520.00                                 480.40 Cash inflows              5.00         0.9057                                 520.00                                 470.98 PV of Cash Inflows                              2,451.00 NPV                                 551.00 Statement showing Cash flows Particulars Time PVf@12% Amount PV Cash Outflows                  -                1.00                           (1,900.00)                           (1,900.00) PV of Cash outflows                           (1,900.00) Cash inflows              1.00         0.8929                                 520.00                                 464.29 Cash inflows              2.00         0.7972                                 520.00                                 414.54 Cash inflows              3.00         0.7118                                 520.00                                 370.13 Cash inflows              4.00         0.6355                                 520.00                                 330.47 Cash inflows              5.00         0.5674                                 520.00                                 295.06 PV of Cash Inflows                              1,874.48 NPV                                 (25.52)

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