All techniques Rieger International is evaluating the feasibility of investing $109,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: T firm has a cost of capital of 11%. a. Calculate the payback period for the proposed investment. b. Calculate the discounted payback period for the proposed investment. c. Calculate the net present value (NPV) for the proposed investment.
All techniques Rieger International is evaluating the feasibility of investing $109,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: T firm has a cost of capital of 11%. a. Calculate the payback period for the proposed investment. b. Calculate the discounted payback period for the proposed investment. c. Calculate the net present value (NPV) for the proposed investment.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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All techniques Rieger International is evaluating the feasibility of investing $109,000 in a piece of equipment that has a
5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table:
firm has a cost of capital of 11%.
The
a. Calculate the payback period for the proposed investment.
b. Calculate the discounted payback period for the proposed investment.
c. Calculate the net present value (NPV) for the proposed investment.
d. Calculate the probability index for the proposed investment.
e. Calculate the internal rate of return (IRR) for the proposed investment.
Data table
(Click on the icon here in order to copy the contents of the data table below
into a spreadsheet.)
Year (t)
1
GAW N
2
3
4
5
Print
Cash inflows (CF₂)
$35,000
$20,000
$30,000
$35,000
$40,000
Done
X
ces.)
Expert Solution
Step 1
Hi student
Since there are multiple subparts, we will answer only first three subparts.
Capital budgeting is one of the important concept in finance, under which projects are selected on the basis of evaluation techniques. Payback period, ARR, NPV, IRR are some techniques of capital budgeting.
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