Determining the monthly net savings

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Assume a cost improvement project has only a first cost of $100,000 and a monthly net savings, M. There is no salvage value. Graph the project's IRR for payback periods from 6 months to the project's life of N years. The firm accepts projects with a 2- year payback period or a 20% IRR. When are these standards consistent and when are they not?

(a) Assume that N = 3 years.

(b) Assume that N = 5 years.

(d) What recommendation do you have for the firm about its project acceptance criteria?

Reference no: EM131809486

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