Question

rowell energy comapny is installing new equipment at a cost of $10 million. expected cash flows from this project over the next five years will be $1,045,000, $2,550,000, $4,125,000, $6,326,750, and $7,000,000. the company's discount rate for such projects is 14 percent. what is the project's discounted payback period?

Answer 1

The payback period of rowell energy company will be more than one hence it will be a positive sign to select the project.

• The term payback period refers to the time it takes to recoup the cost of an investment.
• Simply put, it is the time it takes for an investment to reach breakeven.
• The payback period is the length of time it takes to recover the cost of an investment or the length of time it takes an investor to reach breakeven.
• A short payback period represents an attractive investment, and a long payback period is unfavorable.
• The payback period is calculated by dividing investment by annual cash flow.
• Account and fund managers use payback periods to determine whether an investment should be made.
• One of the drawbacks of Payback is that it ignores the time value of money.

To learn more about the Payback period refer to:

https://brainly.com/question/23149718

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