a.
Adequate information:
The initial cost = I
Required return = r
Annual cash flow = C
Number of years = N.
To compute: The annual cash flow for which the payback period is equal to the life of the project.
Introduction: The payback period is the minimum period of time in which an initial investment of the project is recovered from the net
b.
Adequate information:
Initial cost = I
Required return = r
Annual cash flow = C
Number of years = N.
To compute: The value at which the company will have a positive NPV.
Introduction:
c.
Adequate information:
Initial cost = I
Required return = r
Annual cash flow = C
Number of years = N.
To compute: The annual cash flow when the benefit-cost ratio is 2.
Introduction: The benefit-cost ratio or the profitability index is defined as the ratio between the present worth of future cash inflows of a particular investment and the initial cost of the investment.
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