1. Calculate the NPV for the following project if the firm's cost of capital is 8.2%....

1. Calculate the NPV for the following project if the firm's cost of capital is 8.2%.

Year	0	1	2	3	4	5
Cash Flow	-$3,250,000	$625,000	$750,000	$1,250,000	$1,000,000	$975,000

A.   $274,698
B.   $342,130
C.   $384,956
D.   $196,999

2.Assuming that the cash flows are reinvested at the company's cost of capital, which is 6.8%, what is the Modified Internal Rate of Return (MIRR) for the following project?

Year	0	1	2	3
Cash Flow	-$600,000	$300,000	$150,000	$175,000

A.   4.127%
B.   9.836%
C.   10.241%
D.   6.507%

3.Calculate the Payback Period for the following investment.

Year	0	1	2	3	4	5
Cash Flow	-$3,250,000	$625,000	$750,000	$1,250,000	$1,000,000	$975,000

A. 2.875 years
B.   2.325 years
C.   3.625 years
D.   4.175 years

Expert Solution

1)	B.	$ 3,42,130

Working:
	Year	Cash flows	Discount factor	Present value
	a	b	c=1.082^-a	d=b*c
	0	$ -32,50,000	1.000	$ -32,50,000
	1	$ 6,25,000	0.924	$ 5,77,634
	2	$ 7,50,000	0.854	$ 6,40,629
	3	$ 12,50,000	0.789	$ 9,86,798
	4	$ 10,00,000	0.730	$ 7,29,610
	5	$ 9,75,000	0.674	$ 6,57,458

		NPV		$ 3,42,130

2)	A.	4.127%


Working:	Year	Cash flow
	0	$ -6,00,000.00
	1	$ 3,00,000.00
	2	$ 1,50,000.00
	3	$ 1,75,000.00

Finance rate		6.80%
reinvestment rate		6.80%

MIRR		=mirr(C19:C22,finance rate,reinvestment rate)
		4.127%

3)	C.	3.625 Years

Working:
	Year	Cash flows	Cumulative cash flows
	0	$ -32,50,000.00	$ -32,50,000.00
	1	$ 6,25,000.00	$ -26,25,000.00
	2	$ 7,50,000.00	$ -18,75,000.00
	3	$ 12,50,000.00	$ -6,25,000.00
	4	$ 10,00,000.00	$ 3,75,000.00
	5	$ 9,75,000.00	$ 13,50,000.00

	Payback	=	3+(625000/1000000)
		=	3.625 Years

jeff jeffy answered 4 months ago

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