Category: Business and Money > Accounting
Asked by: jiggerman-ga
List Price: $5.00
21 Sep 2005 17:30 PDT
Expires: 21 Oct 2005 17:30 PDT
Question ID: 570723
A $100,000 investment returns $40,000 after tax for five years and has not remaining value. What is the payback? What is the internal rate of return? If the discount rate is 15% what is the Present value?
Answered By: omnivorous-ga on 22 Sep 2005 04:44 PDT
Jiggerman ? 1. Payback = cost of project / annual cash inflows Investopedia ?Payback period? http://www.investopedia.com/terms/p/paybackperiod.asp In this case is 2.5 years. 2. IRR is the rate of return that yields an NPV = 0. ?IRR? http://www.investopedia.com/terms/i/irr.asp Sorry, but I need a spreadsheet for this one: http://www.mooneyevents.com/jiggerman.xls And the answer is 28.65% 3. The NPV discounts cash flows by an increasing amount each year based on the cost of money, which you?ve put at 15%. So after year 1, it?s Cash flow / 1.15. After year 2 it?s Cash flow / (1.15)^2. It?s easier to set up an NPV factor for these problems ? then just multiply your cash flows. We already know that NPV is positive because you have an IRR greater than 15% -- but the total NPV is $34,086. Google search strategy: "payback period" IRR "internal rate of return" Best regards, Omnivorous-GA
rated this answer:
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From: magnesium-ga on 22 Sep 2005 16:47 PDT
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