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Problem #4 Calculate NPV, Payback, Discounted Payback, IRR and Modified IRR for the following project Initial...
Problem #4
Calculate NPV, Payback, Discounted Payback, IRR and Modified IRR for the following project
Initial Investment: -100,000
Annual project cash flow 22,000 for 6 years
Cost of capital is 6%
Solutions
Expert Solution
| Year | Cash flow | PVIF @ 6% | present value A | Cumulative cash flow | Discounted Cumulative cash flow |
| 0 | -100000 | 1.0000 | (100,000.00) | (100,000.00) | (100,000.00) |
| 1 | 22000 | 0.9434 | 20,754.72 | (78,000.00) | (79,245.28) |
| 2 | 22000 | 0.8900 | 19,579.92 | (56,000.00) | (59,665.36) |
| 3 | 22000 | 0.8396 | 18,471.62 | (34,000.00) | (41,193.74) |
| 4 | 22000 | 0.7921 | 17,426.06 | (12,000.00) | (23,767.68) |
| 5 | 22000 | 0.7473 | 16,439.68 | 10,000.00 | (7,328.00) |
| 6 | 22000 | 0.7050 | 15,509.13 | 32,000.00 | 8,181.14 |
| 8,181.14 | 32,000.00 | 16,362.27 | |||
| Ans 1) | NPV = | 8,181.14 | |||
| Ans 2) | Payback period = | 4.55 | year | ||
| =4+12000/22000 | |||||
| Ans 3) | Discounted payback period = | ||||
| =5+7328/15509.13 | 4.47 | year | |||
| Ans 4) | IRR = | 8.56% | |||
| Ans 5) | MIRR= | 7.40% | |||
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