A Investment cost $1.9 million. The firm is 11% discount rate as a so for accepting capital

Question:

A Investment cost $1.9 million. The firm is 11% discount rate as a so for accepting capital projects. It is expected to have a 5-year life and return the following:

Year 1 ........................$400,000

Year 2 ........................$500,000

Year 3 ........................$650,000

Year 4 ........................$900,000

Year 5 ........................$600,000

a. Calculate the project’s Net Present Value (NPV)

b. Calculate the Profitability Index

c. Calculate the Internal Rate of Return (IRR)

d. Calculate the Payback Period

e. . Calculate the Discounted Payback Period

f. Assuming the funds can be invested at 4%, calculate the Terminal Value and the MIRR

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...