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What will be the payback period for the project

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Reference no: EM132960240

A firm is considering an investment project. The project requires an initial investment of $500,000 and will have no residual value at the end of 5 years. The cost of capital (borrowing) is 10%. The project will generate the following profits:

Year 1 $50,000

Year 2 $100,000

Year 3 $150,000

Year 4 $150,000

Year 5 $150,000

Problem 1: What will be the payback period for this project (in year's to two decimal places) If the firm has established a payback period of 4 years, should the project be accepted?

Reference no: EM132960240

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