Payback, NPV, and IRRRieger International is evaluating thefeasibility...

Payback, NPV, and IRRâ€ƒâ€ƒâ€ƒRieger International is evaluating the feasibility of investing â€‹$86 comma 00086,000 in a piece of...

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Finance

Payback, NPV, and IRRâ€ƒâ€ƒâ€ƒRieger International is evaluating thefeasibility of investing
â€‹$86 comma 00086,000
in a piece of equipment that has a
55â€‹-year
life. The firm has estimated the cash inflows associated withthe proposal as shown in the followingâ€‹ table:
LOADING...
.
The firm has a
99â€‹%
cost of capital.
a.â€ƒâ€ƒCalculate the payback period for the proposedinvestment.
b.â€ƒâ€ƒCalculate the net present valueâ€‹ (NPV) for the proposedinvestment.
c.â€ƒâ€ƒCalculate the internal rate of return
â€‹(IRR)â€‹,
rounded to the nearest wholeâ€‹ percent, for the proposedinvestment.
d.â€ƒâ€ƒEvaluate the acceptability of the proposed investment usingNPV and IRR. What recommendation would you make relative toimplementation of theâ€‹ project?
Questions are:
The payback period of the proposed investment is ___ years
The NPV of the proposed investment is
â€‹The IRR of the proposed investment is
Should Rieger International accept or reject the proposedâ€‹investment?
Year
â€‹(tâ€‹)
Cash inflowsâ€‹ (CF)
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1
â€‹$20 comma 00020,000
2
â€‹$30 comma 00030,000
3
â€‹$35 comma 00035,000
4
â€‹$20 comma 00020,000
5
â€‹$20 comma 00020,000

Answer & Explanation Solved by verified expert

4.3 Ratings (691 Votes)

aPayback period full years until recovery unrecovered cost at the start of the yearcash flow during the year 3 years 86000 85000 20000 3 years 1000 20000 3 years 005 3005 years bNet present value is calculated using a financial calculator by inputting the below Press the CF button CF0 86000 It is See Answer

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