Question

Shannon industries is considering a project that has the following cash flows: Year Project cash flow...

Shannon industries is considering a project that has the following cash flows:

Year Project cash flow

0 $-6,240

1 $1,980

2 $3,750

3 ?

4 $1,000

The project has a payback of 2.85 years.

The firm's cost of capital is 10 percent. what is the project's net present value (NPV)?

a) 874.87

b) -146.92

c) 436.96

d) 727.95

e) -207.02

Homework Answers

Answer #1

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

Year Cash flows Cumulative cash flows
0 (6240) (6240)
1 1980 (4260)
2 3750 (510)
3 x -510+x
4 1000 490+x

2.85=2+(510/x)

x=510/(2.85-2)

=$600

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

=1980/1.1+3750/1.1^2+600/1.1^3+1000/1.1^4

=$6032.98

NPV=Present value of inflows-Present value of outflows

=$6032.98-$6240

WHICH IS EQUAL TO

=$(207.02)(Approx)(Negative).

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Shannon Industries is considering a project which has the following cash flows: Year Cash Flow 0...
Shannon Industries is considering a project which has the following cash flows: Year Cash Flow 0 ? 1 $2,000 2    $3,000 3 $3,000 4 $1,500    The project has a payback period of 2 years. The firm’s cost of capital is 12 percent. What is    the project’s net present value? (round your answer to the nearest $1.) a. $ 570 b. $ 730 c. $2,266 d. $2,761 e. $3,766
Braun Industries is considering an investment project which has the following cash flows: Year Cash Flow...
Braun Industries is considering an investment project which has the following cash flows: Year Cash Flow 0 -$1,000 1 400 2 300 3 500 4 400 The company's WACC is 10 percent. What is the project's payback, internal rate of return, and net present value? Select one: a. Payback = 2.6, IRR = 21.22%, NPV = $300. b. Payback = 2.6, IRR = 21.22%, NPV = $260. c. Payback = 2.4, IRR = 10.00%, NPV = $600. d. Payback =...
Mega Dynamics is considering a project that has the following cash flows: Year Project Cash Flow...
Mega Dynamics is considering a project that has the following cash flows: Year Project Cash Flow 0 ? 1 $2,000 2 3,000 3 3,000 4 1,500 The project has an IRR of 17% . The firm's cost of capital is 11 percent. What is the project's net present value (NPV)?
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 =...
Susmel Inc. is considering a project that has the following cash flow data. What is the...
Susmel Inc. is considering a project that has the following cash flow data. What is the project's payback? Year 0    1 2 3 Cash flows -$475 $150 $200 $300 a. 2.88 years b. 1.96 years c. 2.42 years d. 2.47 years e. 2.85 years
coughlin motors is considering a project with the following expected cash flows. Year Cash flow 0...
coughlin motors is considering a project with the following expected cash flows. Year Cash flow 0 (700) 1 200 2 370 3 225 4 700 The project's cost of capital is 10%. What is the project's discounted payback?
shannon co. is considering a project that has the following cash flow and cost of capital...
shannon co. is considering a project that has the following cash flow and cost of capital (r) data. What is the project discount paycheck? R+ 12.00% Year 0 1 2 3 CF -$1000 $450 $425 $400 $410 $400 A. 2.07 year b. 2.30 year c. 2.52 yeas d. 2.78 years e 2.89 years
Ellmann Systems is considering a project that has the following cash flow and cost of capital...
Ellmann Systems is considering a project that has the following cash flow and cost of capital (r) data. What is the project's NPV? r: 9.00% Year 0 1 2 3 Cash flows −$1,000 $500 $500 $500
Gio's Restaurants is considering a project with the following expected cash? flows: Year Project Cash Flow?...
Gio's Restaurants is considering a project with the following expected cash? flows: Year Project Cash Flow? (millions) 0 ?$(210?) 1 100 2 72 3 100 4 90 If the? project's appropriate discount rate is 11percent, what is the? project's discounted payback? period? The? project's discounted payback period is ____ years? Round to 2 decimal places
shannon co. is considering a project that has the following cash flow and cost of capital...
shannon co. is considering a project that has the following cash flow and cost of capital (r) data. What is the project discount paycheck? R+ 12.00% Year 0 1 2 3 CF -$1000 $450 $425 $400 $410 $400
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT