Question

Project L requires an initial outlay at t = 0 of $65,000, its expected cash inflows are $15,000 per year for 9 years, and its WACC is 14%. What is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.

Project L requires an initial outlay at t = 0 of $77,176, its expected cash inflows are $14,000 per year for 10 years, and its WACC is 12%. What is the project's IRR? Round your answer to two decimal places.

Project A requires an initial outlay at t = 0 of $1,000, and its cash flows are the same in Years 1 through 10. Its IRR is 15%, and its WACC is 9%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

1]	NPV of Project L = -65000+15000*(1.14^9-1)/(0.14*1.14^9) =	$         9,195.58
2]	IRR is that discount rate for which the NPV = 0.
	So, 0 = -77176+14000*PVIFA(irr,10)
	Solving for IRR
	PVIFA(irr,10) = 77176/14000 = 5.5126
	From the PV tables, the factor for 12% = 5.6502 and for 13% = 5.4262.
	IRR = 12%+1%*(5.6502-5.5126)/(5.6502-5.4262) =	12.61%
3]	PV of cash flows when discounted at the IRR of 15% will be equal to the
	initial investment of $1000 [NPV being 0 at IRR].
	Therefore the annual cash flows are = 1000*0.15*1.15^10/(1.15^10-1) =	$             199.25
	FV of the annual cash flows at WACC = 199.25*(1.09^10-1)/0.09 =	$         3,027.19
	MIRR = (3027.19/1000)^(1/10)-1 =	11.71%