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Year                1                   2         &nbsp

Year                1                   2                          3                  4            5

               $20,000            $32,000              $8,000       $2,000         $3,000  

Initial Investment is $50,000

A) What is the project’s payback period? Will you accept the project if the required payback period is 4 years?

B) What is the project’s fair value or present value if you require a 20% return?

C) What is the project’s NPV? Will you accept the project?

D) Explain why the above two techniques lead you to different decisions.

E) What is the project’s IRR? Is the project acceptable if you require a 20% return?

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