Question

1.       Consider the following project.  The firm’s cost of funds and its required rate of return is 13 percent.
Year		Cash Flow
0		-31,000
1		13,000
2		14,000
3		9,000
What is the nondiscounted payback for this project?  If the firm must have payback in less than 2.5 years should it accept or reject the project? (5 Points)
What is the Net Present Value of the project assuming the required rate of return is 13 percent?  Should the firm accept or reject the project? (10 Points)
What is the internal rate of return for the project?  If the required rate of return is 13% should the firm accept or reject the project? (10 Points)

Answer 1