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In: Finance

AAA Inc. has four potential independent projects. The information for each project​ (Cash flows each​ period,...

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)

Solutions

Expert Solution

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

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