Management of Sunland, Inc., is considering switching to a new production technology. The cost of the required equipment will be $4,000,000 . The discount rate is 13 percent. The cash flows that the firm expects the new technology to generate are as follows. Years CF 1–2 0 3–5 $915,000 6–9 $1,470,000 a. Compute the payback and discounted payback periods for the project. (Round answer to 2 decimal places, e.g. 15.25.) The payback for the project ___ is years, and the discounted payback period is ____ years. b. What is the NPV for the project? Should the firm go ahead with the project? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round intermediate calculations to 0 decimal places, e.g. 1,525 and final answer to 2 decimal places, e.g. 15.25.) The NPV of the project is $___, and using the NPV rule the project should be (rejected or accepted). c. What is the IRR, and what would be the decision based on the IRR? (Round answer to 3 decimal places, e.g. 15.256%.) The IRR of the project is _____%, and using IRR rule the project should be (Rejected or accepted)?
Management of Sunland, Inc., is considering switching to a new production technology. The cost of the required equipment will be $4,000,000 . The discount rate is 13 percent. The cash flows that the firm expects the new technology to generate are as follows. Years CF 1–2 0 3–5 $915,000 6–9 $1,470,000 a. Compute the payback and discounted payback periods for the project. (Round answer to 2 decimal places, e.g. 15.25.) The payback for the project ___ is years, and the discounted payback period is ____ years. b. What is the NPV for the project? Should the firm go ahead with the project? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round intermediate calculations to 0 decimal places, e.g. 1,525 and final answer to 2 decimal places, e.g. 15.25.) The NPV of the project is $___, and using the NPV rule the project should be (rejected or accepted). c. What is the IRR, and what would be the decision based on the IRR? (Round answer to 3 decimal places, e.g. 15.256%.) The IRR of the project is _____%, and using IRR rule the project should be (Rejected or accepted)?
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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Management of Sunland, Inc., is considering switching to a new production technology. The cost of the required equipment will be $4,000,000 . The discount rate is 13 percent. The cash flows that the firm expects the new technology to generate are as follows.
| Years | CF | |
| 1–2 | 0 | |
| 3–5 | $915,000 | |
| 6–9 | $1,470,000 |
a. Compute the payback and discounted payback periods for the project. (Round answer to 2 decimal places, e.g. 15.25.)
| The payback for the project ___ is years, and the discounted payback period is ____ years. |
b. What is the
| The NPV of the project is $___, and using the NPV rule the project should be (rejected or accepted). |
c. What is the
| The IRR of the project is _____%, and using IRR rule the project should be (Rejected or accepted)? |
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