3) Y ou are faced with a decision on an investment proposal. Specifically, the e

Question

3) Y ou are faced with a decision on an investment proposal. Specifically, the estimated e estimated annual costs are $80,000, which begin decreasing by S5,000 per me a 9-year analysis period, no salvage value, onal income from the investment is $205,000 per year; the initial investment costs are S650,000; and th year starting at the end of the second year. Assu and MARR = 15%. (a) Draw the cash flow diagram (b) What is the IRR of (c) What is the simple payback period? d) What is the discounted payback period? this proposal? Is this proposal acceptable? Why or why not? a) pw

Explanation / Answer

CF0=-$650000

CF1=$205000-80000=$125000

CF2=$205000-80000=$125000

CF3=$205000-75000=$130000

CF4=$205000-70000=$135000

CF5=$140000

CF6=$145000

CF7=$150000

CF8=$155000

CF9=$160000

Using calculator,Discounted payback period is almost 9 years since both IRR and MARR are near to each other.

Thank you.

CPT IRR=15.029%

This proposal can be accepted because IRR is slightly more than MARR.

Simple payback period is 4+135/140=4.96 years.

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.