
To determine: The payback period,
Payback Period:
It is ascertained when cost of project is divided by the annual cash flows of the respective project. The payback period is a method used in capital budgeting. It does not involve the
Internal Rate of Return (IRR):
IRR is also a technique of capital budgeting that includes the time value of money concept. The IRR of a project is shows as the profitability arises from the project. The IRR of a project is calculated with the help of NPV calculations.
Profitability Index (PI):
The profitability index measure the
Net Present Value (NPV):
NPV is a technique used in capital budgeting to see the project is profitable for the company or not. The selection is based on the result of NPV as if it is positive then it should be selected and in the case of negative NPV it should be rejected.

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Chapter 5 Solutions
Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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