Calculate the payback period for this project

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Reference no: EM13918451

Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $131,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $586,000 per year. The fixed costs associated with this will be $190,000 per year, and variable costs will amount to 21 percent of sales. The equipment necessary for production of the Potato Pet will cost $642,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy’s is in a 30 percent tax bracket and has a required return of 12 percent.

Requirement 1: Calculate the payback period for this project. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Payback period years

Requirement 2: Calculate the NPV for this project. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) NPV $

Requirement 3: Calculate the IRR for this project. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) IRR %

Reference no: EM13918451

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Calculate the payback period for this project : Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $131,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $586,000 p..

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