A firm is considering an investment project with the following cash flows: Year 0 = -$110,000...

A firm is considering an investment project with the following cash flows: Year 0 = -$110,000 (initial costs); Year 1= $40,000; Year 2 =$90,000; and Year 3 = $30,000; and Year 4 = $60,000. The company has a 10% cost of capital. What is the project’s discounted payback?

		1.67 years
		1.86 years
		1.99 years
		2.08 years

A firm is considering an investment project with the following cash flows: Year 0 = -$110,000 (initial costs); Year 1= $40,000; Year 2 =$90,000; and Year 3 = $30,000; and Year 4 = $60,000. The company has a 10% cost of capital, calculate the NPV for the project.

		$58,569
		$64,264
		$74,264
		$77,333

A firm is considering an investment project with the following cash flows: Year 0 = -$110,000 (initial costs); Year 1= $40,000; Year 2 =$90,000; and Year 3 = $30,000; and Year 4 = $60,000. The company has a 10% cost of capital, calculate the IRR for the project.

25.9%

29.8%

34.6%

40.7%

Expert Solution

	Year	Cash flow	PVIF @10%	Present value	Cumulative present value
	0	-110000	1	(110,000.00)	(110,000.00)
	1	40000	0.909091	36,363.64	(73,636.36)
	2	90000	0.826446	74,380.17	743.80
	3	30000	0.751315	22,539.44	23,283.25
	4	60000	0.683013	40,980.81	64,264.05
		NPV =		64,264.05

Ans 1)	project’s discounted payback =
	1+736636.36/74380.17	1.99	Year
		Ans =		1.99	Year

Ans 2)	NPV =			$ 64,264
		Ans =		$ 64,264

Ans 3)	IRR =	34.6%	<using excel formula>

		Ans =	34.6%

jeff jeffy answered 1 year ago

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