Question

Q1/ A project has the following cash flows for years 0 through 3, respectively: -34,416, 15,926, 21,329, 38,250. If the required return is 10.6 percent, what is the net present value of the project?

Q2/ A project has the following cash flows for years 0 through 2, respectively: -11,062, 8,666, 8,313. What is the internal rate of return on this project?

Q3/ A project has the following cash flows, for years 0 through 3 respectively: -27,084, 11,112, 8,232, 9,204. If the required return is 11.8 percent, what is the profitability index?

Q4/A project has the following cash flows for years 1 through 3 respectively: 1,754, 1,176, 1,776. Using a discount rate of 11.8 percent, it has been determined that the profitability index is 0.88. What must the project's initial cost be? (Enter absolute value of the initial cost.)

Answer 1

Q1
Year	Cashflows	PVf @ 10.60		Present values
0	-34416	1		-34416
1	15926	0.904159		14399.64
2	21329	0.817504		17436.54
3	38250	0.739153		28272.62
Net present values				25693
Q2.
Year	Cashflows	PVF @34.25%		Present value
0	-11062	1		-11062
1	8666	0.744879		6455.121
2	8313	0.554845		4612.424
Net present value				5.54
IRR = 34.25%
Q3.
Year	Cashflows	PVf @ 11.80%		Present values
1	15926	0.894454		14245.08
2	21329	0.800049		17064.24
3	38250	0.715607		27371.97
Present value f inflows				58681
Protibality index = Present value of inflows/ Outflows
		58681 /27084= 2.167
Q4.
Year	Cashflows	PVf @ 11.80%		Present values
1	1754	0.894454		1568.873
2	1176	0.800049		940.8572
3	1776	0.715607		1270.918
Present value f inflows				3781
PI = Present Value of inflows/ Initial Investment
0.88 = 3781 / Initial investment
Initial investment = $ 3327