Question

1. Project K costs $45,000, its expected cash inflows are $15,000 per year for 9 years, and its WACC is 11%. What is the project's NPV? Round your answer to the nearest cent. 2. Project K costs $59,542.90, its expected cash inflows are $12,000 per year for 10 years, and its WACC is 14%. What is the project's IRR? Round your answer to two decimal places. 3. Project K costs $75,000, its expected cash inflows are $15,000 per year for 11 years, and its WACC is 11%. What is the project's payback? Round your answer to two decimal places. 4. Project K costs $35,000, its expected cash inflows are $10,000 per year for 8 years, and its WACC is 9%. What is the project's discounted payback? Round your answer to two decimal places.

Answer #1

1) CF_{0}=(45000)

CF_{1}= 15000

CF_{2}= 15000

CF_{3}= 15000

CF_{4}= 15000

CF_{5}= 15000

CF_{6}= 15000

CF_{7}= 15000

CF_{8}= 15000

CF_{9}= 15000

I=11%

NPV=$38805.71

**2)** No. of years =10

cf_{0}= $59542.90

npv=0

cf=12000

npv=cf_{0}+(cf_{1}/(1+irr))+(cf_{2}/(1+irr)^{2})+.....(cf_{n}/(1+irr)^{n})

=15.30%

3) project payback period= initial investment / cash inflow

=75000/15000=5 years

4)

year | |||||

0 | -35000 | -35000 | 1 | -35000 | -35000 |

1 | 10000 | -25000 | .92 | 9174.31 | -25825.69 |

2 | 10000 | -15000 | .84 | 8416.8 | -17408.89 |

3 | 10000 | -5000 | .77 | 7721.83 | -9687.05 |

4 | 10000 | 5000 | .71 | 7084.25 | -2602.8 |

5 | 10000 | 15000 | .65 |
6499.31 |
3896.51 |

6 | 10000 | 25000 | .6 | 5962.67 | 9859.19 |

7 | 10000 | 35000 | .55 | 5470.34 | 15329.53 |

8 | 10000 | 45000 | .5 | 5018.66 | 20348.19 |

discounted payback period=X+(Y/Z)

= 4+ (-2602.8/6499.31) = 4.4 years approx

X=the last time cummulative dcf was negative

Y=the absolute value of ccf at the end of period x

z= value of dcf in the period after X

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