Q4. Abbas Manufacturing firm uses discounted payback period to evaluate investments in capital assets. The company expects the following annual cash flows from an investment of Rs3.500.000: Cash flows (Rs3500000) Year 1 900000 900000 3 900000 4 900000 900000 6 900000 7 900000 8 000006 Nosalvage/residual value is expected. The company's cost of capital is 12%. Required: 1. Compute discounted payback period of the investment. 2. Is the investment desirable if the required payback period is 4 years or less. ww

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
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Q4. Abbas Manufacturing firm uses discounted payback period to evaluate investments in
capital assets. The company expects the following annual cash flows from an investment of
Rs3,500.000:
Year
Cash flows
(Rs3500000)
1
900000
900000
3
900000
4
900000
5
900000
900000
7
900000
8
900000
Nosalvage/residual value is expected. The company's cost of capital is 12%.
Required:
1. Compute discounted payback period of the investment.
2. Is the investment desirable if the required payback period is 4 years or less.
ww
Transcribed Image Text:Q4. Abbas Manufacturing firm uses discounted payback period to evaluate investments in capital assets. The company expects the following annual cash flows from an investment of Rs3,500.000: Year Cash flows (Rs3500000) 1 900000 900000 3 900000 4 900000 5 900000 900000 7 900000 8 900000 Nosalvage/residual value is expected. The company's cost of capital is 12%. Required: 1. Compute discounted payback period of the investment. 2. Is the investment desirable if the required payback period is 4 years or less. ww
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