In: Finance
AAA Inc. has four potential independent projects. The information for each project (Cash flows each period, NPV, IRR, MIRR, and PI) is presented in the table below but unfortunately some is missing. For your convenience, PVIF and FVIF for years 1 to 5 are also presented in the last two columns of the table. The discount rate is 10%,
Year |
Project I |
Project II |
Project III |
Project IV |
PVIF |
FVIF |
0 |
-300,000 |
-5,000 |
-100,000 |
-100,000 |
1 |
|
1 |
10,000 |
15,000 |
200,000 |
10,000 |
0.9091 |
1.4641 |
2 |
150,000 |
15,000 |
15,000 |
150,000 |
0.8265 |
1.331 |
3 |
150,000 |
15,000 |
15,000 |
150,000 |
0.7513 |
1.21 |
4 |
150,000 |
15,000 |
15,000 |
150,000 |
0.6830 |
1.1 |
5 |
150,000 |
15,000 |
15,000 |
150,000 |
0.6209 |
1 |
NPV |
141,345 |
??? |
??? |
341,345 |
||
IRR |
23.86 |
??? |
112.66% |
79.87% |
||
MIRR |
??? |
??? |
29.37% |
48.03 |
||
PI |
1.47 |
11.37 |
??? |
4.41 |
What is the NPV of project II(round to the nearest dollar and use commas to separate thousands)? The NPV of project II is $_____
What is the IRR for project II (Hint: use concepts/formulas from chapter 4 to find the rate of an annuity) ** round to the nearest integer The IRR for project II rounded to the nearest integer is _____%
What is the NPV for project III? The NPV for project III is $____(please round to the nearest dollar)
Project II | ||||||
Discount rate | 10.000% | |||||
Year | 0 | 1 | 2 | 3 | 4 | 5 |
Cash flow stream | -5000 | 15000 | 15000 | 15000 | 15000 | 15000 |
Discounting factor | 1.000 | 1.100 | 1.210 | 1.331 | 1.464 | 1.611 |
Discounted cash flows project | -5000.000 | 13636.364 | 12396.694 | 11269.722 | 10245.202 | 9313.820 |
NPV = Sum of discounted cash flows | ||||||
NPV Project II = | 51862 | |||||
Where | ||||||
Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||||
Discounted Cashflow= | Cash flow stream/discounting factor |
Project II | ||||||
IRR is the rate at which NPV =0 | 0 | |||||
IRR | 300% | |||||
Year | 0 | 1 | 2 | 3 | 4 | 5 |
Cash flow stream | -5000.000 | 15000.000 | 15000.000 | 15000.000 | 15000.000 | 15000.000 |
Discounting factor | 1.000 | 3.997 | 15.976 | 63.859 | 255.248 | 1020.242 |
Discounted cash flows project | -5000.000 | 3752.759 | 938.880 | 234.893 | 58.766 | 14.702 |
NPV = Sum of discounted cash flows | ||||||
NPV Project II = | 0.000 | |||||
Where | ||||||
Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||||
Discounted Cashflow= | Cash flow stream/discounting factor | |||||
IRR= | 300% |
Project III | ||||||
Discount rate | 10.000% | |||||
Year | 0 | 1 | 2 | 3 | 4 | 5 |
Cash flow stream | -100000 | 200000 | 15000 | 15000 | 15000 | 15000 |
Discounting factor | 1.000 | 1.100 | 1.210 | 1.331 | 1.464 | 1.611 |
Discounted cash flows project | -100000.000 | 181818.182 | 12396.694 | 11269.722 | 10245.202 | 9313.820 |
NPV = Sum of discounted cash flows | ||||||
NPV Project III = | 125044 | |||||
Where | ||||||
Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||||
Discounted Cashflow= | Cash flow stream/discounting factor |