Question
In: Finance
Consider a project with the following cash flows: $3,500 at t=1, $12,500 at t=2, $15,000 at...
| Consider a project with the following cash flows: $3,500 at t=1, $12,500 at t=2, $15,000 at t=3, $15,000 at t=4. The Discounted Payback Period of this project is 3.3 years. The appropriate discount rate is 11%. Find the Net Present Value of the project. (Note that the cash flow for t=0 is not provided to you.) | |||||||||||||||||
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Solutions
Expert Solution
A. $6,916.67
Working:
| a. | Calculate cost of project | |||||||||
| Year | Cash flow | Discount factor | Present Value | Cumulative Present Value | ||||||
| 1 | $ 3,500 | 0.9009 | $ 3,153.15 | $ 3,153.15 | ||||||
| 2 | $ 12,500 | 0.8116 | $ 10,145.28 | $ 13,298.43 | ||||||
| 3 | $ 15,000 | 0.7312 | $ 10,967.87 | $ 24,266.30 | ||||||
| 4 | $ 15,000 | 0.6587 | $ 9,880.96 | $ 34,147.27 | ||||||
| Discounted Cash flow in year 4 to get Cost of investment | = | $ 9,880.96 | x | 0.3 | = | $ 2,964.29 | ||||
| Cost of Project | = | Present Value of cash inflows in 3.3 years | ||||||||
| = | $ 24,266.30 | + | $ 2,964.29 | |||||||
| = | $ 27,230.59 | |||||||||
| b. | Calculation of Net Present Value | |||||||||
| Present Value of cash inflows | $ 34,147.27 | |||||||||
| Cost of Project | $ -27,230.59 | |||||||||
| Net Present Value | $ 6,916.68 | |||||||||
jeff jeffy answered 2 years agoRelated Solutions
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Year t=0 t=1 t=2 t=3 t=4
??? $7,500 $12,500 $15,000 $17,500
The Payback Period of this project is 2.4 years. The appropriate
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This will be a negative value
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t=0
t=1
t=2
t=3
A
($1,212)
$898
$543
$111
B
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Question 1 16 Marks Consider a project with the following cash flows: Consider a project with...
Question 1 16 Marks
Consider a project with the following cash flows:
Consider a project with the following cash flows:
Year Cash Flow
0 R17,500
1 -80,500
2 138,425
3 -105,455
4 30,030
Required: 1.1.Fill in the following table:
Cost of Capital (%) Project NPV
0
5
10
15
20
25
30
35
50
1.2.Use the values developed in part (1.1) to draw an NPV
profile for this project.
1.3.What is the IRR for this project?
1.4.Describe the conditions under...
You are given the following information: Project A Project B Investment $125,000 $100,000 CF-1 $12,500 $15,000...
You are given the following information:
Project A
Project B
Investment
$125,000
$100,000
CF-1
$12,500
$15,000
CF-2
$15,000
$25,000
CF-3
$25,000
$20,000
CF-4
$40,000
$10,000
CF-5
$60,000
$15,000
CF-6
$70,000
$35,000
Required rate of return
10%
10%
Compute the following:
a) MIRR for Project A
b) MIRR for Project B
c) Profitability Index for Project A
d) Profitability Index for Project B
A project has annual cash flows of $3,500 for the next 10 years and then $6,000...
A project has annual cash flows of $3,500 for the next 10 years
and then $6,000 each year for the following 10 years. The IRR of
this 20-year project is 12.1%. If the firm's WACC is 8%, what is
the project's NPV?
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your answer to the nearest cent.
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and then $8,000 each year for the following 10 years. The IRR of
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NPV
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$___
Consider the following two cash flows: CF1: 100 at t=0, 200 at t=2, and 300 at...
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CF1: 100 at t=0, 200 at t=2, and 300 at t=3
CF2: X at t=1, X at t=2, and 2X at t=4
The interest rate rises by 3% every year, so:
between t=0 and t=1: i=0%; between t=1 and t=2: i=3%; between
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What the value of X that makes the two cash flows
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Question 3 options:
86-106
106-126
126-146
146-166
None of the above
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