Question

What would cause the PV of the expected net cash inflows for a project to be different from the PV of the expected net profit after tax for the project?

Answer #1

Net cash inflows are different than net profit after tax.

Net cash inflows are pure net cash of an entity. The net profit after tax is not necessary a pure cash element.

The present value is applied on money or cash directly hence it gives understandable or comprehensive result which can be related to time value of money concept.

Net profit after tax has few non-cash items like depreciation, intangible assets written off etc. which finally results in lower tax. Lower tax means lesser cash outflow. As non-cash items deflate the net profit after tax hence it will result in lower present value. Whereas in case of Net Cash inflows we will experience higher PV because net cash inflows ignore non-cash items.

Hence in general scenarios, PV of Net Cash Inflows will be greater than PV of Net Profit After Tax.

A project has an initial cost of $36,075, expected net cash
inflows of $14,000 per year for 7 years, and a cost of capital of
10%. What is the project's MIRR? Do not round intermediate
calculations. Round your answer to two decimal places. Answer =
_____________________
A project has an initial cost of $48,675, expected net cash
inflows of $14,000 per year for 10 years, and a cost of capital of
13%. What is the project's PI? Do not round...

1. The cash inflows and (outflows) associated with a project are
as follows:
Year
Expected net cash flow ($)
0
120000
1
40000
2
50000
3
60000
The payback period for this project would be:
a. 2 years
b. 3 years
c. 2 years and 6 months
d. 2 years and 3 months

1. A project has an initial cost of $74,475, expected net cash
inflows of $9,000 per year for 8 years, and a cost of capital of
12%. What is the project's MIRR? Do not round intermediate
calculations. Round your answer to two decimal places.
2. A project has an initial cost of $46,800, expected net cash
inflows of $10,000 per year for 6 years, and a cost of capital of
13%. What is the project's PI? Do not round your...

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...

A project has an initial cost of $55,000, expected net cash
inflows of $12,000 per year for 8 years, and a cost of capital of
13%. 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.
A project has an initial cost of $55,000, expected net cash
inflows of $10,000 per year for 11 years, and a cost of capital of
12%. What is the project's...

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.

1. A project has an initial cost of $63,275, expected net cash
inflows of $15,000 per year for 9 years, and a cost of capital of
8%. What is the project's NPV? (Hint: Begin by constructing a time
line.) Do not round your intermediate calculations. Round your
answer to the nearest cent.
2. A project has an initial cost of $63,275, expected net cash
inflows of $15,000 per year for 9 years, and a cost of capital of
8%. What...

a
project has an initial cost of $36,875 expected net cash inflows of
$15,000 per year for 12 years, and a cost of capital of 11%. what
is the project's NPV?

Project A cost $67,775 its expected net cash inflows are $10,000
per year for 10 years and its WACC is 8%
what is its IRR

Project A costs $45,750, its expected net cash inflows are
$10,000 per year for 7 years, and its WACC is 10 percent. What is
the project's MIRR?

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 18 minutes ago

asked 18 minutes ago

asked 23 minutes ago

asked 59 minutes ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago