Question

1. Project L costs $35,000, its expected cash inflows are $14,000 per year for 8 years, and its WACC is 9%. What is the project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

2. Project L costs $71,242.75, its expected cash inflows are $14,000 per year for 11 years, and its WACC is 14%. What is the project's IRR? Round your answer to two decimal places.

3. Project L costs $40,000, its expected cash inflows are $15,000 per year for 8 years, and its WACC is 9%. What is the project's MIRR? Round your answer to two decimal places. Do not round your intermediate calculations.

4. Project L costs $50,000, its expected cash inflows are $9,000 per year for 11 years, and its WACC is 13%. What is the project's payback? Round your answer to two decimal places.

5. Project L costs $40,000, its expected cash inflows are $9,000 per year for 8 years, and its WACC is 11%. What is the project's discounted payback? Round your answer to two decimal places.

Answer 1

Solution to QUESTION-1

Net Present Value (NPV) of the Project

Year	Annual cash inflow ($)	Present Value factor at 9.00%	Present Value of annual cash inflow ($)
1	14,000	0.917431	12,844.04
2	14,000	0.841680	11,783.52
3	14,000	0.772183	10,810.57
4	14,000	0.708425	9,917.95
5	14,000	0.649931	9,099.04
6	14,000	0.596267	8,347.74
7	14,000	0.547034	7,658.48
8	14,000	0.501866	7,026.13
TOTAL			77,487.47

Net Present Value (NPV) of the Project = Present Value of annual cash inflows – Initial Investment

= $77,487.47 - $35,000

= $42,487.47

“Hence, the Net Present Value (NPV) of the Project will be $42,487.47”

NOTE

The formula for calculating the Present Value Inflow Factor (PVIF) is [1 / (1 + r)ⁿ], where “r” is the Discount Rate/Cost of capital and “n” is the number of years.