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An investment project requires a net investment of $100,000. The project is expected to generate annual net cash flows of $28,000 for the next 5 years. The firm's cost of capital is 12%.                         Part 1 - Determine the payback period for the project                      Part 2 – Determine the payback period accounting for the present value of future cash flow (ie. Present value calculations) Should the project be done?   After considering present value is the 100,000-investment recovered in 3-4 years, 4-5 years or over 5 years?

An investment project requires a net investment of $100,000. The project is expected to generate annual net cash flows of $28,000 for the next 5 years. The firm's cost of capital is 12%.                         Part 1 - Determine the payback period for the project                      Part 2 – Determine the payback period accounting for the present value of future cash flow (ie. Present value calculations) Should the project be done?   After considering present value is the 100,000-investment recovered in 3-4 years, 4-5 years or over 5 years?

Essentials Of Investments
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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  • An investment project requires a net investment of $100,000. The project is expected to generate annual net cash flows of $28,000 for the next 5 years. The firm's cost of capital is 12%.                       
  •  Part 1 - Determine the payback period for the project                     
  • Part 2 – Determine the payback period accounting for the present value of future cash flow (ie. Present value calculations) Should the project be done?   After considering present value is the 100,000-investment recovered in 3-4 years, 4-5 years or over 5 years?
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