Task1) An investment project offers cash inflows of $675 per year for eight years. What is project payback period when the initial cost is $1,850? What when the initial cost is $3,600? What when it is $5,500?
Question1. What is project payback period when the initial cost is $1,850?
Question2. What is project payback period when the initial cost is $3,600?
Question3. What is project payback period when the initial cost is $5,500?
Task2) A firm measures all of its projects by applying IRR rule. A project under consideration has the following cash flows:
Year Cash Flow
0 –$27,700
1 11,700
2 14,700
3 10,700
Question1. If required return is 18 percent, what is IRR for this project?
Question2. Should firm accept following project?