Question

Risky Business is looking at a project with the following estimated cash​ flow:

Initial investment at start of​ project: ​$13,000,000
Cash flow at end of year​ one: $2,080,000
Cash flow at end of years two through​ six: $2,600,000
each year

Cash flow at end of years seven through​ nine: $2,496,000

each year

Cash flow at end of year​ ten: $1,920,000

Risky Business wants to know the payback​ period, NPV,​ IRR, MIRR, and PI of this project. The appropriate discount rate for the project is 10​%. If the cutoff period is 6 years for major​ projects, determine whether the management at Risky Business will accept or reject the project under the five different decision models.

a) What is the payback period for the new project at risky business?

b) What is the NPV for the project at risky business?

c) What is the IRR for the new project at risky business?

d) What is the MIRR for the new project at risky business?

e) What is the PI for the new project at Risky Business?

Answer 1