Question

Project L requires an initial outlay at t = 0 of $50,000, its expected cash inflows are $15,000 per year for 9 years, and its WACC is 13%. What is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.

Project L requires an initial outlay at t = 0 of $55,000, its expected cash inflows are $8,000 per year for 9 years, and its WACC is 14%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

1 ) NPV = Present value of cash inflow-cash outflows

• Present value of cash inflows = $15,000* PVAF(13%,9 years)

There is uniform series of cash inflows so we will use annuity

PVAF(13%,9) = [1/1.13]^1 +[1/1.13]^2+[1/1.13]^3+[1/1.13]^4+[1/1.13]^5+[1/1.13]^6+[1/1.13]^7+[1/1.13]^8+[1/1.13]^9

=5.131655127

present value = 5.131655*15.000=$76,975

• Initial outlay = $50,000

Net Present value = $76,974.826-$50,000

=$26,975 (rounded off)

2)

-1

FV of cash inflows = $8,000*FVA (14%,9years)

FVA=18.3375

FV of cash flows = $8,000*18.33729510

=$146,698.36080

= 1.1151679666 -1

=11.52%