Question

An expansion project being considered by your firm has an initial cost of $8,000,000 and expected net cash flows of $1,500,000 per year for the first 2 years, 1,800,000 for the third and fourth years, and $1,900,000 per year for the fifth and sixth years. All cash flows will occur at the end of each year. Assume that the project will be terminatedat the end of the sixth year. Your firm’s cost of capital is 11%. Calculate the Net Present Value (NPV), the Modified Internal Rate of Return (MIRR), the Discounted Payback Period, and the Equivalent Annual Annuity for this project. Should the project be accepted? Why or why not? Give an interpretation for each of the four methods and indicate how they are used.

Answer #1

Your company has an opportunity to invest in a project that is
expected to result in after-tax cash flows of $20,000 the first
year, $22,000 the second year, $25,000 the third year, -$8,000 the
fourth year, $32,000 the fifth year, $38,000 the sixth year,
$41,000 the seventh year, and -$6,000 the eighth year. The project
would cost the firm $90,200. If the firm's cost of capital is 15%,
what is the modified internal rate of return? Question 29 options:
15.22%...

MIRR
A project has an initial cost of $48,025, expected net cash
inflows of $8,000 per year for 12 years, and a cost of capital of
13%. What is the project's MIRR? Do not round intermediate
calculations. Round your answer to two decimal places.
Profitability Index
A project has an initial cost of $45,950, expected net cash
inflows of $13,000 per year for 10 years, and a cost of capital of
12%. What is the project's PI? Do not round...

MIRR
A project has an initial cost of $55,000, expected net cash
inflows of $11,000 per year for 12 years, and a cost of capital of
8%. What is the project's MIRR? (Hint: Begin by
constructing a time line.) Do not round intermediate calculations.
Round your answer to two decimal places.
Unequal Lives
Shao Airlines is considering the purchase of two alternative
planes. Plane A has an expected life of 5 years, will cost $100
million, and will produce net...

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...

A project has an initial cost of $35,000, expected net cash
inflows of $8,000 per year for 7 years, and a cost of capital of
11%. What is the project's discounted payback period? Round your
answer to two decimal places.

A project has an initial cost of $40,000, expected net cash
inflows of $9,000 per year for 9 years, and a cost of capital of
11%. What is the project's discounted payback period? Round your
answer to two decimal places.

A project has an initial cost of $52,125, expected net cash
inflows of $12,000 per year for 8 years, and a cost of capital of
12%. What is the project's discounted payback period? Round your
answer to two decimal places.

A project has an initial cost of $52,125, expected net cash
inflows of $12,000 per year for 8 years, and a cost of capital of
12%. What is the project's discounted payback period? Round your
answer to two decimal places.

Sun King Computers is considering the following project. The
projected net cash flows are:
Initial Cost is $3.5 million; annual net cash flows are $815,000
per year for 7 years.
What is the Discounted Payback Period if the appropriate discount
rate is 7.5%?

Project K has an initial cost of $81,996, and its expected net
cash inflows are $12,250 per year for 10 years. The firm has a WACC
of 7 percent, and Project K’s risk would be similar to that of the
firm’s existing assets. Calculate the discounted payback period of
Project K.

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