Your Company has a project with the following cash flows. The required rate of return is...
Your Company has a project with the following cash flows. The required rate of return is 13.6%.
Year Cash Flow
0 -63,600
1 18,200
2 34,500
3 35,900
What is the Net Present Value?
What is the Payback?
Homework Answers
Net present value = present value of cash inflows – present value of cash outflows
= -63,600 + 18,200/(1.136) + 34,500/(1.136)2 + 35,900/(1.136)3
= $3,643.38
Payback period is the time period in which the initial investment is recovered.
|
Year |
Cash Flow |
Cumulative Cash Flow |
|
0 |
-63,600 |
-63,600 |
|
1 |
18,200 |
-45,400 |
|
2 |
34,500 |
-10,900 |
|
3 |
35,900 |
25,000 |
Payback period = 2 + (10,900/35,900)
= 2.3036 years
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