Question

1. Braun Industries is considering an investment project which has the following cash flows:

Year                 project cash flows

0                          -$1000

1                               500

2                               600

3                               700

4                               400

The company’s WACC is 10 percent. What is the project’s payback, discounted payback, internal rate of return, modified internal rate of return, and net present value? show work.

Answer 1

	Year	Cash flow	Cumulative cash flow	PVIF @ 10%	Present value S	Cumulative discounted cash flow
	0	(1,000)	(1,000)	1.0000	(1,000.00)	(1,000.00)
	1	500	(500)	0.9091	454.55	(545.45)
	2	600	100	0.8264	495.87	(49.59)
	3	700	800	0.7513	525.92	476.33
	4	400	1,200	0.6830	273.21	749.54
					749.54
Ans 1		payback period =	1+500/600		1.83	year
Ans 2		Discounted payback period	2+49.59/525.92		2.09	year
Ans 3		IRR =			41.49%
ans 4		MIRR =			26.51%
ans 5		NPV =			749.54