BUSI 2503 Study Guide - Final Guide: Discounted Cash Flow, Net Present Value, Forklift

• School: Carleton University
• Department: Business
• Course: BUSI 2503
• Professor: Issac Otchere

Document Summary

Npv = -3,000 + 800 annuity factor(10%, 6 years) = . 21. At this discount rate, you should accept the project. You can solve for irr by setting the pv of cash flows equal to 3,000 on your calculator and solving for the interest rate: pv = -3000; n = 6; fv = 0; pmt = 800; compute i. Irr is 15. 34%, which is the highest discount rate before project npv turns negative. Since the discounted cash flows become positive by year 4, the project pays back sometime in the fourth year. Note that out of the total discounted cash flow of . 20 in year 4, the first. . 60 comes in by 693. 60/739. 20 = 0. 94 year. Therefore, the discounted payback for the project is 3. 94 years, and thus the project should be pursued. Since the discounted cash flows become positive by year 6, the project pays back in 5 years +