Question

Bill plans to open a do-it-yourself dog bathing center in a storefront. The bathing equipment will cost $50,000. Bill expects the after-tax cash inflows to be $15,000 annually for 8 years, after which he plans to scrap the equipment and retire to the beaches of Jamaica.

16.	What is the project's payback period?
A)	2.67 years
B)	3.33 years
C)	3.67 years
D)	4.33 years
E)	5.67 years

17.	Assume the required return is 10%. What is the project's NPV?
A)	$887
B)	$13,322
C)	$22,759
D)	$30,023.89
E)	$80,023.89

18.	Assume the required return is 20%. What is the project's IRR? Should it be accepted?
A)	14.95%; yes
B)	15%; no
C)	27%; yes
D)	28%; no
E)	None of the above

Answer 1