CourseLover

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    Devry University
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    NatSteel Holdings Pte Ltd
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Category > Accounting Posted 20 Dec 2017 My Price 10.00

What is the net present value (NPV) of this project?

Generic Motors Corporation is planning to invest $225,000 in year zero (today) in new equipment. This investment is expected to generate net cash flows of $90,000 a year for the next 4 years (years 1-4). The salvage value after 4 years is zero. The discount rate (cost of capital) is 20% a year.

 

Required:

 a) What is the net present value (NPV) of this project?

    NPV = $1

Should the firm invest, based on NPV? (1=yes, 2=no)2

 

b) What is the payback period for this project?

    payback period = 3 years

 

c) What is the modified payback period for this project?

between 1 and 2 yearsbetween 2 and 3 yearsbetween 3 and 4 years

 

d) What is the accounting rate of return (ARR) for this project?

To compute ARR, first compute:

 

   annual depreciation=$5

   annual income=$6

   average investment=$7

ARR = 8 % (enter say 10% as 10, not as 0.1 and not as 10%)

Answers

CourseLover
(12)
Status NEW Posted 20 Dec 2017 08:12 AM My Price 10.00

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