Your company is considering a high-risk project that could yield strong revenues but will involve a significant up-front investment. Because of this risk, top management is naturally concerned about how long it is likely to take to pay off that investment so that they can begin to realize profits. This project will require an investment of $200,000 and your five-year projection for inflows is: Year 1 – $50,000, Year 2 – $75,000, Year 3 – $125,000, Year 4 – $200,000, and Year 5 – $250,000. Your firm’s required rate of return is 18%. How long will it take to pay back your initial investment? Determine the answer to this question by using an excel file to determine the “Payback Period.” Note:The Payback period does not use the “time value of money” or “discounted-payback” method. Determine the answer to this question by using an excel file to determine the “Net Present Value of Money (NPV)” method. Note: The NPV method uses the“time value of money” or “discounted payback” method.
Your company is considering a high-risk project that could yield strong revenues but will involve a significant up-front investment. Because of this risk, top management is naturally concerned about how long it is likely to take to pay off that investment so that they can begin to realize profits. This project will require an investment of $200,000 and your five-year projection for inflows is: Year 1 – $50,000, Year 2 – $75,000, Year 3 – $125,000, Year 4 – $200,000, and Year 5 – $250,000. Your firm’s required
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