FundRobot » Investments » Calculating NPV and Payback period?

Old   #1 (permalink)
Posts: 2,553
Default calculating npv and payback period

Hello everyone :)

I have a managerial accounting question and would really appreciate if someone could help me. I have an exam coming up but I have fallen ill and unfortunately missed a few lectures. I have a friends notes but am really struggling to follow how some of the solutions of were gotten.

I will give 10 points to anyone who answers and explains the process. I understand it might be a bit time consuming but you have no idea how thankful I would be for this help!

The Question states:

A company is considering whether or not to invest in an item of equipment for £60,000.

An investment of £12.50 in additional working capital would also be required. The cash profits from the new item of equipment are estimated to be.

Year Cash Profit
1 10,000
2 25,000
3 30,000
4 22,500

The equipment would have a resale value of £6,000 at the end of year 4. The cost of capital is 12% and the relevant discount factors are:

1 0.893
2 0.797
3 0.712
4 0.636


i. Calculate, in years and months, the payback period for the project/

ii. Calculate the Net Present value of the project

Again thank you so much!
GoldAddicted is offline   Reply With Quote


Thread Tools

Premium Numbers - Premium Domains - Find Arena - Cash - Coding Core - Bills - Find Arena - Bagoly - Wrestling -