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# Using the Payback Method, IRR, and NPV

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.

VERY IMPORTANT – TWO SUBMISSIONS ARE REQUIRED FOR THIS ASSIGNMENT

STEP 1 – (Submit as a WORD document in APA format)

Describe internal rate of return (IRR), net present value (NPV), and the payback method. Provide an advantage and disadvantage of each method. Describe the break-even point and its importance. Your outline for your paper should look similar to the following:

• Intro
• Internal Rate of Return (include description of method, advantages & disadvantages)
• Break-Even Point
• Conclusion
• References

Each point above should be a paragraph containing 4-5 sentences, with the exception of the references page. There are required references for each assignment. Those are given to you below. So, all you need to do is copy, paste and then proceed to double-space, alphabetize and format into a hanging indent. You should not need to use other references. But if you do, format those using the Reference and Citation Generator Tool (see link below).

Minimum required references include your textbook (see below).

Ross, S., Westerfield, R., Jaffe, J. & Jordan, B. (2016). Corporate finance (11th edition). New York, N.Y. McGraw-Hill Education.

STEP 2 – (Submit as an EXCEL spreadsheet)

Calculate the following time value of money problems. The calculations must be done in Excel. You must show your work. If you submit these in Word, you will not receive credit. If you do not show your work, you will not receive credit. Examples are provided above for review prior to starting this assignment. FOLLOW MY EXAMPLES!

1. If you want to accumulate \$500,000 in 10 years, how much do you need to deposit today that pays an interest rate of 15%?
2. What is the future value if you plan to invest\$200,000 for 15 years and the interest rate is 5%?
3. What is the interest rate for an initial investment of \$100,000 to grow to \$300,000 in 20 years?
4. If your company purchases an annuity that will pay \$50,000/year for 15 years at a 11% discount rate, what is the value of the annuity on the purchase date if the first annuity payment is made on the date of purchase?
5. What is the rate of return required to accumulate \$400,000 if you invest \$10,000 per year for 10 years. Assume all payments are made at the end of the period.
6. See table below. What is the project cash flow generated for Project A and Project B using the NPV method? Which would you choose and why? Assume a 15% discount rate.
7. See table below. What is the payback period for Project A and Project B using the payback method? Which would you choose and why? You must calculate both problems for credit, even if the answer is obvious.

“Table showing investments and returns for Project A and Project B. Project A has \$10,000 initial investment with \$5,000 returns in each of the first 3 years. Project B has \$55,000 initial investment with \$20,000 in each of the first 3 years.”

NOTE: APA format, submit both files (1 word document and 1 Excel showing all calculations done)

Use in-text citations according to references used.

List all references used

The instructor is using a software to plarigism that shows if you are using someone else’s answers or papers no water how good you are in re-wording.

FOLLOW all instructions listed above carefully.

See attached file which is provided by the instructor