Question

Given that the cost of capital for Zilin is 10%, what is the NPV for the project with the following cash flows:

Time CF ($)

0 -10,000

1 5,300

2 4,300

3 1,874

4 1,500

Question 3 options:

	$804.38
	$907
	$1,048.02
	$233.39

What is the payback period for a project with an initial outlay of $1000 and cash inflows (all amounts in dollars) of 100 in year 1, 300 in year 2, 400 in year 3 and 675 in year 4. The cost of capital for the company is 10%.  

Question 4 options:

	2.33 years
	5 years
	3.3 years
	4.1 years

Answer 1

a.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=5300/1.1+4300/1.1^2+1874/1.1^3+1500/1.1^4

=$10804.38

NPV=Present value of inflows-Present value of outflows

=$10804.38-$10000

=$804.38(Approx).

b.

Year	Cash flows	Cumulative Cash flows
0	(1000)	(1000)
1	100	(900)
2	300	(600)
3	400	(200)
4	675	475

Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).

=3+(200/675)

=3.3 years(Approx).