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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%

jeff jeffy answered 1 year ago
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