core: 0 of 1 pt 4of62 complete) Hw Score: 12.5%, 0.75 of 6 10-22 (similar to Que

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core: 0 of 1 pt 4of62 complete) Hw Score: 12.5%, 0.75 of 6 10-22 (similar to Question Help Payback, NPV, and IRR Rieger International is attempting to evaluate the feasibility of investing $97,000 in a piece of equipment that has a 5-year life. The firm ha estimated the cash inflows associated with the proposal as shown in the following table: The firm has a 12% cost of capital. a. Calculate the payback period for the proposed investment. b. Calculate the net present value (NPV) for the proposed investment. c. Calculate the internal rate of return (IRR), rounded to the nearest whole percent, for the proposed investment. d. Evaluate the acceptability of the proposed investment using NPV and IRR. What recommendation would you make relative to implementation of the project? a. The payback period ofthe proposed investment is[ years. (Round to two decimal Data Table (Click on the icon located on the top-right corner of the data table below copy its contents into a spreadsheet.) Year (f) Cash inflows (CF) $30,000 $35,000 $35,000 $20,000 $35,000 to nter your answer in the answer box and then click Check Answer Clear A

Explanation / Answer

since NPV is positive and IRR > cost of capital, the project should be accepted

Year Project A PV cumulative cash flow cumulative PV cash flow 0 -97000 -97000 1 30000 26785.71429 -67000 -70214.28571 2 35,000 27901.78571 -32,000 -42312.5 3 20,000 14235.60496 -12,000 -28076.89504 4 35,000 22243.13274 23,000 -5833.7623 5 35,000 19859.93995 58,000 14026.17765 NPV 17.59% IRR payback period 3.34 discounted payabck period 4.26 PI 1.14459977

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