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) |
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