Problem:
A company is considering a proposal to invest $30,000 in a project that would provide the following net cash flows:
Year 1 $6,500
Year 2 $10,700
Year 3 $15,000
Year 4 $12,800
Required:
Question 1: What is the project's payback period?
Question 2: Compute the net present value of the project assuming a 10% discount rate with the following factors: PV factors for $1(yr 1: 0.9091; yr 2: 0.8264; yr 3:0 .7513; yr 4: 0.6830)
Question 3: Should the company invest in the machine? Explain.
Note: Please show how you came up with the solution.