Question

(Q27-Q30) Your restaurant’s new project, creating a gluten-free menu, is expected to have the following cash flows. The company requires a project to have a payback period less than 2 years. The company’s required rate of return is 18%.

Year	Cash Flows	Cumulative cash flows
0	-$850,000
1	$300,000
2	$400,000
3	$500,000

What is the project’s payback period? (Calculate it by filling out the cumulative cash flows column)

A. 3 years

B. 1.7 years

C. 2.3 years

D. 2.8 years

What is the project’s net present value (NPV)?

A. –$4,173.5

B. $4,173.5

C. $350,000

D. –$10,800.96

What is the project’s internal rate of return (IRR)?

A. 27.95%

B. 7.72%

C. 15.50%

D. 17.72%

If this project is an independent project, will you accept it?

A. Yes

B. No

Answer 1