What is the payback period for the project

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Reference no: EM131337995

Suppose Palmer Properties is considering investing $3.6 million today (i.e., C₀ = -3,600,000) on a new project that is expected to last for 8 years. The project is expected to generate annual cash flows of C₁ = -200,000; C₂ = 400,000, C₃ = 750,000 and then $900,000 for period C₄ through C₈. If the discount rate is 7% and management’s payback period cutoff is 5 years: Please answer without doing tables.

a) What is the payback period for the project? Show your work

b) What is the net present value of the project ? Show your work

c) What is the internal rate of return on the project ? Show your work

d) Under which method(s) above should the company accept the project (applying the acceptance rules)? Explain

Reference no: EM131337995

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