## Info

5,000

425,000

4. Calculating Discounted Payback An investment project has annual cash inflows of \$7,000, \$7,500, \$8,000, and \$8,500, and a discount rate of 12 percent. What is the discounted payback period for these cash flows if the initial cost is \$8,000? What if the initial cost is \$13,000? What if it is \$18,000?

5. Calculating Discounted Payback An investment project costs \$8,000 and has annual cash flows of \$1,700 for six years. What is the discounted payback period if the discount rate is zero percent? What if the discount rate is 5 percent? If it is 15 percent?

6. Calculating AAR You're trying to determine whether or not to expand your business by building a new manufacturing plant. The plant has an installation cost of \$12 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of \$1,416,000, \$1,032,000, \$1,562,000, and \$985,000 over these four years, what is the project's average accounting return (AAR)?

7. Calculating IRR A firm evaluates all of its projects by applying the IRR rule. If the required return is 18 percent, should the firm accept the following project?

Year

Cash Flow