Reference no: EM131800295
1. What is the payback period of the following project?
Initial Investment: $80,000
Projected life: 8 years
Net cash flows each year: $15,000
2. What is the discounted payback period of the following project, assuming your cost of capital is 7%?
Initial Investment: $80,000
Projected life: 8 years
Net cash flows each year: $15,000
3. Your firm is looking at a new investment opportunity, Project X, with net cash flows as follows:
---- Net Cash Flows ----
Project X
Initial Cost at T-0 (Now) ($10,000)
cash inflow at the end of year 1 5,000
cash inflow at the end of year 2 4,000
cash inflow at the end of year 3 3,000
Calculate project Alpha's Net Present Value (NPV), assuming your firm's required rate of return is 9%.
4. What is the Profitability Index of project X in question 3?
5. Consider Project X and another Project, Project Y, with net cash flows as follows:
---- Net Cash Flows ----
Project X Project Y
Initial Cost at T-0 (Now) ($10,000) ($20,000)
cash inflow at the end of year 1 5,000 3,000
cash inflow at the end of year 2 4,000 8,000
cash inflow at the end of year 3 3,000 13,000
a. Construct NPV Profiles for these two projects, assuming your firm's required rate of return is 9%.
b. If the two projects were mutually exclusive, which would you accept if your firm's cost of capital were 5%? Which would you accept if your firm's cost of capital were 10%?
6. Calculate the IRR of the following project:
Year Cash Flow
0 ($30,000)
1 $11,000
2 $12,000
3 $13,000
7. Calculate the Modified Internal Rate of Return (MIRR) of the project in Question, assuming your firm's cost of capital is 8%.