Question

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 = 2.6, IRR = 21.22%, NPV = $289, PI=1.29

  • D.

    Payback = 3.6, IRR = 20.22%, NPV = $318, PI=1.32

  • E.

    Payback = 2.6, IRR = 21.22%, NPV = $260, PI=1.26

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Answer #1

Answer :

  • E.

    Payback = 2.6, IRR = 21.22%, NPV = $260, PI=1.26

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