Should the project be accepted

Reference no: EM13288447

Harmon Enterprises is considering an investment that will cost $326,000. The investment produces no cash flows for the first year. In the second year, the cash inflow is $47,000. This inflow will increase to $198,000 and then $226,000 for the following two years, respectively, before ceasing permanently. The firm requires a 15.5 percent rate of return and has a required discounted payback period of three years. Should the project be accepted? Why or why not? Please Show work!

Answer

accept; The discounted payback period is 2.18 years.

accept; The discounted payback period is 2.32 years.

accept; The discounted payback period is 2.98 years.

reject; The discounted payback period is 2.18 years.

reject; The project never pays back on a discounted basis.

Reference no: EM13288447

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