Using the Payback Method, IRR, and NPV

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Assignment Content

1.

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Resource

Corporate Finance

Purpose of Assignment

The purpose of this assignment is to allow the student to calculate the project cash flow using net present value (NPV), internal rate of return (IRR), and the payback methods.

Assignment Steps

Create a 350-word memo to management including the following:

· Describe the use of internal rate of return (IRR), net present value (NPV), and the payback method in evaluating project cash flows.

· Describe the break-even point and its importance.

· Describe the advantages and disadvantages of each method.

Calculate the following time value of money problems:

1. If you want to accumulate $500,000 in 20 years, how much do you need to deposit today that pays an interest rate of 15%?

1. What is the future value if you plan to invest $200,000 for 5 years and the interest rate is 5%?