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What is the payback period

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Question - As part of VM's digital growth strategy, Senior Management is considering whether or not to invest in a project that will cost $100,000 in initial investment. VM's Board of Directors currently requires a rate of return of 10%, and you expect inflation to remain relatively constant at 4%. You anticipate a useful life of four years for the project and have projected future cash flows as follows:

Year 1: $30,000

Year 2: $40,000

Year 3: $40,000

Year 4: $35,00

Required -

1. What is the Payback period?

2. Using the NPV method, should VM undertake this project?

Reference no: EM133171896

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