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Problem:

Charlie Company is attempting to evaluate the feasibility of investing $95,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown below. Assume the firm has a 12% cost of capital.

Year Cash inflows
1 $20,000
2 25,000
3 30,000
4 35,000
5 40,000

Required:

Question 1: Calculate the payback period for the proposed investment.

Question 2: Calculate the NPV for the proposed investment.

Note: Please show how to work it out.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91170330

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