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Calculate the net present value for the project

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Question - Sal is considering a project that costs $15,000. The project produces cash in?ows of $3,000, $5,000, $7,000, and $3,000 respectively for the next four years. Assume a discount rate of 6%. Sal wants to recoup his money within 3 years.

a. Calculate the payback period. Should Sal accept the project based on a required payback period of 3 years? Explain your answer.

b. Calculate the discounted payback period. Explain why Sal should or should not accept the project based on discounted payback as the decision criteria.

c. Calculate the net present value for the project. Using net present value as Sal's decision making criteria, explain why he should or should not accept the project.

Reference no: EM133164014

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