Question

In: Finance

Project 1 Initial $    150,000.00 Investment Cost of Capital 10% Target Payback 4 years Cash Flow...

Project 1
Initial $    150,000.00
Investment
Cost of Capital 10%
Target Payback 4 years
Cash Flow
Project 1 Cum. CF Discounted CF Cum. CF
Initial Investment $   (150,000) $   (150,000) $   (150,000) $   (150,000)
Year 1 $      35,000 $     (115,000) $ 31,818 $     (118,182)
Year 2 $      35,000 $     (80,000) $      28,926 $     (89,256)
Year 3 $ 45,000 $     (35,000) $ 33,809 $     (55,447)
Year 4 $ 45,000 $ 10,000 $ 30,736 $     (24,711)
Year 5 $ 45,000 $ 55,000 $      27,941 $       3,230

Please find the answer for the Payback Period, Discounted Payback, NPV, IRR for Project One. Explain how to get the answer
.

Solutions

Expert Solution

Cash Flow
Project 1 Cum. CF PVIF @ 10% Discounted CF Cum. CF
Initial Investment -150000 -150000           1.0000                                         (150,000.00) (150,000.00)
Year 1 35000 -115000           0.9091                                             31,818.18 (118,181.82)
Year 2 35000 -80000           0.8264                                             28,925.62     (89,256.20)
Year 3 45000 -35000           0.7513                                             33,809.17     (55,447.03)
Year 4 45000 10000           0.6830                                             30,735.61     (24,711.43)
Year 5 45000 55000           0.6209                                             27,941.46        3,230.03
                                3,230.03
Ans 1 Payback period = 3+35000/45000          3.78 year
Ans 2 Discounted payback period = 4+24711.43/27941.46          4.88 year
Ans 3 NPV = 3,230.03
Ans 4 IRR = 10.80%

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