The Great Eastern Toys Company is evaluating a new product. The cash flows that are expected from this product over its six years’ expected life are shown below. Note that the final year’s cash flow includes $2,000 of working capital to be recovered at the end of the project.
Cash Flow
Now - 25,000
End of the year 1 to 5 5,000
End of the year 7,500
Given the above information, compute the following measures: Payback period, Discounted payback period at a 10 percent discount rate, Net present value at a 10 percent discount rate, Internal rate of return and Profitability index.