A Company Is Considering a Proposal to Invest $30,000 in a Project

question 46

Essay

A company is considering a proposal to invest $30,000 in a project that would provide the following net cash flows:
$$\begin{array} { l l } \text { Year 1 } & \$ 6,500 \\\text { Year 2 } & 10,700 \\\text { Year 3 } & 15,000 \\\text { Year 4 } & 12,800\end{array}$$
a.Compute the project's payback period.
b.Compute the net present value of the project assuming a 10% discount rate with the following factors: PV factors for $1(yr.1: 0.9091; yr.2: 0.8264; yr.3:0 .7513; yr.4: 0.6830)
c.Should the company invest in the machine? Why or why not?

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Definitions:

Vice President

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