Simple payback period and internal rate of return

Reference no: EM132002415

Derive an analytical relationship between simple payback period and internal rate of return (IRR) over a 15-year assessment period for a project with a single fixed capital payment (K) at the beginning of year 1 and equal constant-dollar annual net benefits over this period (B). Hint: the simple payback period will be K/B. Use the equation for IRR given in the week 2 lecture. Then solve this equation iteratively using Excel for payback periods between 1 and 15, and plot the corresponding graph of IRR vs Payback Period. K/B= summation (period n= 15)?1/(1+r)+1/(1+r)^2 +1/(1+r)^3 ?+?+ 1/(1+r)^15.

Reference no: EM132002415

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