Calculate the payback and discounted payback


Problem:

Given the following capital project data:

Cost of automation system (invoice):    $750,000
Transportation and installation:             $150,000
Training:                                             $100,000
Firm's WACC:                                          10%
Firm's tax rate:    40%
Depreciation 5 years, straight line
Life of project:                                      3 years
Salvage value:                                     $375,000
Annual cost savings (net):                     $100,000
Increased annual sales (net):                $200,000

Calculate (1) the payback, (2) the discounted payback, (3) the NPV, (4) the IRR, (5) the MIRR, and (6) your recommendation on the project.

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Finance Basics: Calculate the payback and discounted payback
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