Answer:
3.92
NPV when I is 3% = $335.65
NPV when I is 10% = $-66.70
Explanation:
Pay back period is the amount of time it takes to recover the amount invested in a project to be recovered from the cumulative cash flows.
Payback period = amount invested / cash flow = $2000 / $510 = 3.92
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Cash flow in year 0 = $-2000
Cash flow each year from year 1 to 5 = $510
NPV when I is 3% = $335.65
NPV when I is 10% = $-66.70
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
I hope my answer helps you
