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What is the payback period for the project

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Reference no: EM132089074

Question - A new furnace costs $27,000 to install and will require ongoing maintenance expenditures of $1,500 per year. But, this furnace is far more fuel efficient than the old furnace and will reduce fuel consumption of heating oil by 2,400 gallons per year. Heating oil this year will cost $3.00/gallon. The price per gallon is expected to increase for $0.50/gallon per year for the next 3 years and then, stabilize for the foreseeable future. The furnace will last for 20 years, at which point it will need to be replaced and it will have no salvage value. The discount rate is 8%.

Requirements:

a) What is the payback period for the project? Round your answer to one decimal place.

b) What is the net present value of the project? Round your answer to the nearest whole dollar ($).

c) What is the IRR for the project? Round your answer to one decimal place.

NOTE: In your Excel spreadsheet, all calculations must be included.

Reference no: EM132089074

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