Question

1. Monroe, Inc., is evaluating a project. The company uses a 13.8 percent discount rate for this project. Cost and cash flows are shown in the table. What is the NPV of the project?

Year Project

0 ($11,368,000)

1 $ 2,157,589

2 $ 3,787,552

3 $  3,200,650

4 $ 4,115,899

5 $ 4,556,424

Round to two decimal places.

2. McKenna Sports Authority is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $817,500, and $1,245,000 over the next three years. What is the payback period for this project? Round to four decimal places.

3.

An investment of $83 generates after-tax cash flows of $38.00 in Year 1, $66.00 in Year 2, and $127.00 in Year 3. The required rate of return is 20 percent. The net present value is

Round to two decimal places.

4. Muncy, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $815,322, $863,275, $937,250, $1,017,112, $1,212,960, and $1,225,000 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment? Round to two decimal places.

Answer 1

1

Project
Discount rate	0.138
Year	0	1	2	3	4	5
Cash flow stream	-11368000	2157589	3787552	3200650	4115899	4556424
Discounting factor	1	1.138	1.295044	1.47376	1.677139	1.908584
Discounted cash flows project	-11368000	1895948	2924651	2171758	2454119.2	2387332
NPV = Sum of discounted cash flows
NPV Project =	465808.46
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

2

Project
Year	Cash flow stream	Cumulative cash flow
0	-1850000	-1850000
1	525000	-1325000
2	817500	-507500
3	1245000	737500
Payback period is the time by which undiscounted cashflow cover the intial investment outlay
this is happening between year 2 and 3
therefore by interpolation payback period = 2 + (0-(-507500))/(737500-(-507500))
2.41 Years

Please ask remaining parts seperately, questions are unrelated, I have done one bonus