Question

Using the Payback Method, IRR, and NPV Problems

**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.

**Assignment Steps**

**Resources****:** *Corporate
Finance*

**Calculate** the following time value of money
problems in Microsoft Excel or Word document. You must show all of
your calculations.

If you want to accumulate $500,000 in 20 years, how much do you need to deposit today that pays an interest rate of 15%?

What is the future value if you plan to invest $200,000 for 5 years and the interest rate is 5%?

What is the interest rate for an initial investment of $100,000 to grow to $300,000 in 10 years?

If your company purchases an annuity that will pay $50,000/year for 10 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?

What is the rate of return required to accumulate $400,000 if you invest $10,000 per year for 20 years. Assume all payments are made at the end of the period.

**Calculate** the project cash flow generated for
Project A and Project B using the NPV method.

Which project would you select, and why?

Which project would you select under the payback method? The discount rate is 10% for both projects.

Use Microsoft^{®} Excel^{®} to prepare your
answer.

Note that a similar problem is in the textbook in Section 5.1.

Sample Template for Project A and Project B:

**Show** all work.

**Submit** the all calcluations.

**Click** the Assignment Files tab to submit your
assignment.

Answer #1

1. PV = FV / (1+r)n = 500,000 /(1.15)20 = 500,000/16.37 = $ 30543.68

2. Assumed there is no compounding effect, FV value of $ 200,000 would be 200,000 x {1(0.05x5)} = $ 250,000

3. Interest rate = (future value/present value)^{(1+r) -1
=} (300,000/100,000)^{(1/10)} -1 = 0.1161 = 11.61%

4. Value of annuity = $ 500,000 x 6.53760476 = $ 326,852.38

5. 400000 = 10000 {(1+i)^{n} - 1 )/i} = 6.77%

figures for project A and B not given so could not calculate. Moreover an expert here is allowrd to answer initia; 4 questions only.

Most of these problems will be easier using a spreadsheet.
1. What is the present value of a perpetuity with $5000 annual
payments? Assume 3% discount rate.
2. How much money do you need to create an annuity of
$2000/month for 20 years assuming you can invest the capital in an
instrument (say treasuries) with a 3% rate and semi-annual
compounding?
3. You wish to purchase a new car which costs $50,000. You have
$10,000 for a down payment. The...

NPV, the IRR method, the payback rule, or the discounted payback
rule. In your answer define and describe each method, using
formulas

LO 3 LO 4 7.
Calculating NPV and IRR. A project that provides annual cash
flows of $2,620 for eight years costs $9,430 today. Is this a good
project if the required return is 8 percent? What if it's 24
percent? At what discount rate would you be indifferent between
accepting the project and rejecting it?
LO 4 9.
Calculating NPV. For the cash flows in the previous problem,
what is the NPV at a discount rate of...

(Payback
period, NPV, PI, and IRR
calculations)
You are considering a project with an initial cash outlay of
$75,000
and expected free cash flows of
$26,000
at the end of each year for
5
years. The required rate of return for this project is
7
percent.
a. What is the project's payback period?
b. What is the project's
NPV?
c. What is the project's
PI?
d. What is the project's
IRR?

A project has the following cash flows. What is the payback
period, NPV, PI, IRR, MIRR, and EAA? Assume an interest rate of
5%.
Year CF ($)
0) -5,000
1). 2,700
2). 3,300
3) 1,400
4). 330
5) 340
Also upload your excel files showing your work.

(Payback period, NPV, PI, and IRR calculations) You are
considering a project with an initial cash outlay of $80,000 and
expected free cash flows of $26,000 at the end of each year for 6
years. The required rate of return for this project is 7
percent.
a. What is the project's payback period?
b. What is the project's NPV?
c. What is the project's PI?
d. What is the project's IRR?
a. The project's payback period is nothing years. (Round...

Payback, NPV, and IRR: Rieger International is evaluating the
feasibility of investing
$96,000 in a piece of equipment that has a 5-year life. The
firm has estimated the cash inflows associated with the proposal as
shown in the following table: The firm has a 8% cost of
capital.
a. Calculate the payback period for the proposed
investment.
b. Calculate the net present value (NPV) for the proposed
investment.
c. Calculate the internal rate of return (IRR), rounded to
the nearest...

Please show your steps! Question 1
a) What is the NPV, IRR, and payback period of a project with
the following cash flows if WACC is 20%?
Time: 0
1
2
3
4
5
-$350,000
$100,000
$100,000
$100,000
$50,000
$50,000
NPV=
IRR=
Payback period=
b) Should you accept or reject the project according to NPV and
IRR?
*can you please include greater than an less than signs.* Thank
you.

. Calculate the IRR and NPV for the following cash flows. Assume
a 15% discount rate
Year
Project 1
Cash flow
Project 2
Cash flow
0
-$20,000
-$20,000
1
1,000
12,000
2
3,000
15,000
3
4,000
3,000
4
12,000
4,000
5
15,000
1,000
9. If your tenant pays you rent of $24,000 a year for 10 years,
what is the present value of the series of payments discounted at
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10. You are going to invest $300,000 in a...

Requirements: Using Microsoft Excel to calculate and analyze the
Net Present Value (NPV), Internal Rate of Return (IRR), Accounting
Rate of Return and Payback Period of the following investment
(chapter 20, text).
Initial investment
$ 12,950
Estimated life
5 years
Annual cash inflows
$ 6,000
Cost of capital
12%

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