Discuss what is the payback period for project

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The following information will be used for questions eight and nine.

The Beetle Company is evaluating a purchase of machine for 1,000,000 that will provide a 10-year annual cash flow of $200,000. The company expects the salvage value of the asset to be $100,000. In addition, the machine will require maintenance costs of $100,000 at the end of the fourth year and $150,000 at the end of the seventh year. The project requires an investment in working capital at the beginning of the project of $50,000.

What is the payback period for this project?

Select one:

a. 5 years

b. 5.75 years

c. 5.5 years

d. 6 years

Assuming that the Beetle Company has a WACC of 11%, what is the net present value of this project?

Select one:
a. $180,674
b. $163,064
c. $42,552
d. $24,943

Reference no: EM131779595

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