Question

Holly Inc has a project with a cost of -$X with an equal the cash inflow...

Holly Inc has a project with a cost of -$X with an equal the cash inflow of $700 for three years. If the project’s payback is 2.2 years, the cost of capital is 9%, and the IRR is 17.27%, what is the NPV of this project?

Year 0 1 2 3

Cash Flows -$X $700 $700 $700

a. $-1,540.00 b. $231.91 c. $0 d. $560.00 e. $200.80

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

intial investment = cashflow*payback = 2.2*700=1540

Project
Discount rate 9.000%
Year 0 1 2 3
Cash flow stream -1540 700 700 700
Discounting factor 1.000 1.090 1.188 1.295
Discounted cash flows project -1540.000 642.202 589.176 540.528
NPV = Sum of discounted cash flows
NPV Project = 231.91
Where
Discounting factor = (1 + discount rate)^(Corresponding period in years)
Discounted Cashflow= Cash flow stream/discounting factor
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Telesis Corp is considering a project that has the following cash flows: Year Cash Flow 0...
Telesis Corp is considering a project that has the following cash flows: Year Cash Flow 0 -$1,000 1 400 2 300 3 500 4 400 The company’s weighted average cost of capital (WACC) is 10%. What are the project’s payback period (Payback), internal rate of return (IRR), net present value (NPV), and profitability index (PI)? A. Payback = 3.5, IRR = 10.22%, NPV = $1260, PI=1.26 B. Payback = 2.6, IRR = 21.22%, NPV = $349, PI=1.35 C. Payback =...
Cost: $10,000 Annual cash inflow: $2,000 Life: 6 years Cost of capital: 13% Given the information...
Cost: $10,000 Annual cash inflow: $2,000 Life: 6 years Cost of capital: 13% Given the information above, which of the following statements is the least accurate and why? a. The NPV is -$2004.90; reject the project b. The IRR is 5.47%; reject the project c. Payback period is 5 years d. Discounted payback period is 4.5 years
17.       ABC Inc. is considering a project that has the following cash flows: Year 0 1 2...
17.       ABC Inc. is considering a project that has the following cash flows: Year 0 1 2 3 4 Cash Flows -$1,000 $400 $300 ? $200 It takes 2.5 years to recover the initial cash outlays.  The firm’s cost of capital is 15%.  What is the project’s NPV? ____ A)        $83.5 B)        $92.6 C)        $105.5 D)        $120.0
2. A project has the following cash flows             C0                    C1    &n
2. A project has the following cash flows             C0                    C1                    C2                    C3                                       ($1000)             $300                $400                $600 What is the project’s payback period? Year 0 1 2 3 Cash Flow ($1000) $300 $400 $600 Cumulative ($1000) ($700) ($300) 300 a. Calculate the projects NPV at 10%. b. Calculate the project’s PI at 10%. c. Calculate an IRR for the project in question 2 How would you answer a,b, and c in excel? I am getting...
You are considering a project with an initial cash outlay of $100,000 and expected free cash...
You are considering a project with an initial cash outlay of $100,000 and expected free cash flows of $23,000 at the end of each year for 6 years. The required rate of return for this project is 10 percent. a. What is the project’s payback period? b. What is the project’s discounted payback period? c. What is the project’s NPV ? d. What is the project’s PI ? e. What is the project’s IRR ? f. What is the project’s...
Frazier Fudge, Inc. is considering 2 mutually exclusive projects with the following cash flows. Which project...
Frazier Fudge, Inc. is considering 2 mutually exclusive projects with the following cash flows. Which project should be accepted? Assume a cost of capital of 10%. Years Project X Project Y 0 ($350) ($350) 1 $130 $200 2 $150 $120 3 $180 $120 a. Project X because NPV is $27.4 b. Project Y because NPV is $31 c. Project X because IRR is 13.7% d. Project Y because IRR is 12.2%
An investment project has the following cash flows: initial cost = $1,000,000; cash inflows = $200,000...
An investment project has the following cash flows: initial cost = $1,000,000; cash inflows = $200,000 per year for eight years. If the required rate of return is 12%: i) Compute the project’s NPV. What decision should be made using NPV? ii) Compute the project’s IRR. How would the IRR decision rule be used for this project, and what decision would be reached?
PROBLEM 2 Winston Clinic is evaluating a project that costs $52,125 and has expected net cash...
PROBLEM 2 Winston Clinic is evaluating a project that costs $52,125 and has expected net cash flows of $12,000 per year for eight years. The first inflow occurs one year after the cost outflow, and the project has a cost of capital of 12 percent. a. What is the project's payback? b. What is the project's NPV? Its IRR? c. Is the project financially acceptable? Explain your answer.
Shannon industries is considering a project that has the following cash flows: Year Project cash flow...
Shannon industries is considering a project that has the following cash flows: Year Project cash flow 0 $-6,240 1 $1,980 2 $3,750 3 ? 4 $1,000 The project has a payback of 2.85 years. The firm's cost of capital is 10 percent. what is the project's net present value (NPV)? a) 874.87 b) -146.92 c) 436.96 d) 727.95 e) -207.02
Anderson Systems is considering a project that has the following cash flow and WACC data. WACC...
Anderson Systems is considering a project that has the following cash flow and WACC data. WACC = 11.50% Year 0    1 2 3 4 Cash flows ($1,000) $350 $350 $350 $350 a) What is the project's NPV? b) What is the project’s IRR? c) What is the project’s payback period?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT