An independent project initially cost $25,000 and will return cash inflows of $9

Question

An independent project initially cost $25,000 and will return cash inflows of $9,000 for three years. In the fourth year, you will need to upgrade the equipment at a net cost (outflow) of $5,000, In the fifth year, the project will generate an additional cash inflow of $9,000. If you knew the firm's discount rate, which of the following methods would determine whether to clearly accept or reject the independent project? A. NPV and PI b. NPV, IRR, and Pl c. NPV. IRR, and Payback Period D. NPV, Pl, and Payback Period E. NPV, IRR. Pl. and Payback Period An independent project initially cost $25,000 and will return cash inflows of $9,000 for three years. In the fourth year, you will need to upgrade the equipment at a net cost (outflow) of $5,000, In the fifth year, the project will generate an additional cash inflow of $9,000. If you knew the firm's discount rate, which of the following methods would determine whether to clearly accept or reject the independent project? A. NPV and PI b. NPV, IRR, and Pl c. NPV. IRR, and Payback Period D. NPV, Pl, and Payback Period E. NPV, IRR. Pl. and Payback Period An independent project initially cost $25,000 and will return cash inflows of $9,000 for three years. In the fourth year, you will need to upgrade the equipment at a net cost (outflow) of $5,000, In the fifth year, the project will generate an additional cash inflow of $9,000. If you knew the firm's discount rate, which of the following methods would determine whether to clearly accept or reject the independent project? A. NPV and PI b. NPV, IRR, and Pl c. NPV. IRR, and Payback Period D. NPV, Pl, and Payback Period E. NPV, IRR. Pl. and Payback Period

Explanation / Answer

option B. is correct

NPV, IRR, and PI methods use discount rate to evaluate a project, where as payback period is independent of the discount rate to be used. hence option b is correct

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