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) CF₀=(45000)

CF₁= 15000

CF₂= 15000

CF₃= 15000

CF₄= 15000

CF₅= 15000

CF₆= 15000

CF₇= 15000

CF₈= 15000

CF₉= 15000

I=11%

NPV=$38805.71

2) No. of years =10

cf₀= $59542.90

npv=0

cf=12000

npv=cf₀+(cf₁/(1+irr))+(cf₂/(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