Overland Corporation has gathered the following data on a proposed investment project:
Investment required in equipment: $150,000
Annual cash inflow: $40,000
Salvage value of equipment: $0
Life of the investment: 10 years
Required rate of return: 10%
The company uses straight-line depreciation on all equipment. Assume cash flows occur
uniformly throughout a year except for the initial investment.
The payback period for the investment is:
A. 0.27 years
B. 3.75 years
C. 10.00 years
D. 2.13 years
The net present value of this investment is:
A. $40,000
B. $3,625
C. $57,831
D. $95,800
The internal rate of return on the investment is closest to:
A. 23%
B. 25%
C. 24%
D. 21%