A project that costs $2,800 to install will provide annual cash flows of $630 for the...

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Finance

A project that costs $2,800 to install will provide annual cashflows of $630 for the next 6 years. The firm accepts projects withpayback periods of less than 4 years.
a-1. What is this project's payback period? (Round youranswer to 3 decimal places.)
  Payback period years
a-2. Will the project be accepted?
No
Yes
b-1.
What is project NPV if the discount rate is 2%? (Do notround intermediate calculations. Round your answer to 2 decimalplaces.)
  NPV $
b-2. Should this project be pursued?
Yes
No
b-3.
What is project NPV if the discount rate is 12%?(Negative amount should be indicated by a minus sign. Donot round intermediate calculations. Round your answer to 2 decimalplaces.)
  NPV $
b-4. Should this project be pursued?
Yes
No
b-5. Will the firm’s decision change as the discount ratechanges?

Answer & Explanation Solved by verified expert

4.4 Ratings (732 Votes)

Answer a1 Payback Period Initial Investment Annual Cash Flows Payback Period 2800 630 Payback Period 4444 years Answer a2 The firm accepts projects See Answer

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A project that costs $2,800 to install will provide annual cashflows of $630 for the next 6 years. The firm accepts projects withpayback periods of less than 4 years.a-1.What is this project's payback period? (Round youranswer to 3 decimal places.) Payback periodyearsa-2.Will the project be accepted?NoYesb-1.What is project NPV if the discount rate is 2%? (Do notround intermediate calculations. Round your answer to 2 decimalplaces.) NPV$ b-2.Should this project be pursued?YesNob-3.What is project NPV if the discount rate is 12%?(Negative amount should be indicated by a minus sign. Donot round intermediate calculations. Round your answer to 2 decimalplaces.) NPV$ b-4.Should this project be pursued?YesNob-5.Will the firm’s decision change as the discount ratechanges?