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Consider an investment that costs $100,000 and has a cash inflow of $25,000 every year for...

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Finance

Consider an investment that costs $100,000 and has a cash inflowof $25,000 every year for 5 years. The required return is 9%, andpayback cutoff is 4 years.

A. What is the payback period?

B. What is the discounted payback period?

C. What is the NPV? D. What is the IRR?

E. Should we accept the project?

What method should be the primary decision rule?

When is the IRR rule unreliable?

Please include steps on how to solve and all parts toquestion. Thank you.

Answer & Explanation Solved by verified expert
4.0 Ratings (514 Votes)
Answer Initial Outlay 100000 Annual Cash InFlow 25000 Time Period 5 Years A Payback Period Initial OutlayCash Flow per year Payback Period 10000025000 4 Years B Discounted Payback Period Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 CashFlows 100000 25000 25000 25000 25000 25000 Present Value Discounted at 9 100000 22936 21042 19305    See Answer
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