Question

Cremona Company is considering a project that has the following cash flow and WACC data. What is the project’s Discounted payback, NPV, and MIRR? Weighted Average Cost of Capital (WACC) of Cremona Company is 12%

Year	CF
0	(1,000,000)
1	350,000
2	600,000
3	200,000
4	350,000
5	300,000

Please explain & show work/steps

Answer 1

Discounted Cash Flow year 1 =350000/(1+12%)=312500
Discounted Cash Flow year 2 =600000/(1+12%)^2=478316.3265
Discounted Cash Flow year 3 =200000/(1+12%)^3=142356.0496
​​​​​​​Discounted Cash Flow year 4 =350000/(1+12%)^4=222431.3274
​​​​​​​Discounted Cash Flow year 5 =300000/(1+12%)^5=170228.0567
Payback period formula = Years before recovery + Cost not covered in that year/ Cash flow for that year
=3+(1000000-312500-478316.3265-142356.0496)/222431.3274 =3.30 years

NPV =PV of Cash Flows-Initial Investment =350000/(1+12%)+600000/(1+12%)^2+200000/(1+12%)^3+350000/(1+12%)^4+
300000/(1+12%)^5-1000000=325831.76

FV of cash Flows =350000*(1+12%)+600000*(1+12%)^2+200000*(1+12%)^3+350000*(1+12%)^4+300000*(1+12%)^5
=2505059.88
MIRR =(FV/PV)^(1/n)-1 =(2505059.88/1000000)^(1/5)-1=20.16%