A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. What is the project’s NPV? (Hint: Begin by constructing the timeline)
10-2 – IRR
Refer to problem 10-1. What is the project’s IRR?
10-3 – MIRR
Refer to problem 10-1. What is the project’s MIRR?
10-4 – Profitability Index
Refer to problem 10-1. What is the project’s PI?
10-5 – Payback
Refer to problem 10-1. What is the project payback period?
10-6 – Discounted payback
Refer to problem 10-1. What is the project discounted payback period?
10-7 – NPV
Your division is considering two investment projects, each of which requires an up-front expenditure of $15 million. You estimate that the investments will produce the following net cash flows:
YEAR PROJECT A PROJECT B
1 $ 5,000,000 $20,000,000
2 10,000,000 10,000,000
3 20,000,000 6,000,000
A. What are the two projects' net present values, assuming the cost of capital is:
a) 5%?
b) 10%?
c) 15%?
B. What are the two project’s IRRs at the same cost of capital?