WA 5.xlsx - Payback Period = Initial Investment Cash Flow...

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Payback Period = Initial Investment / Cash Flow Payback Period = $45,000/$2000 Payback Period = 22.5
Cost of equipment = $ 200,000 Joe invest = $ 40,000 $ 160,000 Joe's opportunity cost = 4% Lender's interest rate = 8% % debt = 80% % equity = 20% % debt * Joe's opportunity cost + % equity * lender's interest rate 7.2% Loan amount = WACC = WACC =
10 % + (11 % - 10 %) * (8.5136 - 8.1234) / (8.5136 - 7.9633) = 10.71%
a.) PVB = $15,000 * (4.8684) PVB = $ 73,026 b.) PVC = $ 75,000 c.) NPV = PVB – PVC NPV = $ (1,974) d.) IRR = 9.20%
a.)

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