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Capital budgeting exercise

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Capital Budgeting Exercise

A project will cost $1.9 million. The company uses a 11% discount rate as a threshold for accepting capital projects.  It is expected to have a 5 year life and return the following:

Year 1  $400,000

Year 2  $500,000

Year 3  $650,000

Year 4  $900,000

Year 5  $600,000

a. Calculate the project's  Net Present Value (NPV)

b. Calculate the Profitability Index

c. Calculate the Internal Rate of Return (IRR)

d. Calculate the Payback Period

e. Calculate the Discounted Payback Period

f. Assuming the funds can be invested at 4%, calculate the  Terminal Value and the MIRR

Reference no: EM132444562

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