Homework Answers
| a | IRR | 9.70% |
| b | NPV | -52.59 |
| c | Payback | 2.5 |
d: The project should be rejected since NPV is negative.
Workings
| Year | Initial cost | cumulative CF |
| 0 | -10000 | -10000 |
| 1 | 4000 | -6000.00 |
| 2 | 4000 | -2000.00 |
| 3 | 4000 | 2000.00 |
Payback = Year in which Cumulative CF is last negative -(Last negative cumulative CF/ CF of next year
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