week 8 is one of the most application based weeks of the course.One of the main uses of TVM concepts is to help a firms CFO and CEO decide what new investments to approve vs. disapprove. This is referred to as capital budgeting. There are 3 commonly used methods to do capital budgeting; simple payback net present value or NPV and internal rate of return or IRR.Use all three methods for the following example:A project is expected to generate a savings or profit improvement of $25 000/yr each for 4 yearsThe investment needed to generate this savings is $80 000a. whats the simple payback periodb. whats the projects NPV if the firms discount rate or cost of capital is 10%c. whats the projects IRRFor all three methods completely ignore taxes and depreciation.
