Question
1. Answer questions 1-4 using the information below. Here is the cash flow of project A. Assume the discount rate is 15%. Year0 (initial cost):
1. Answer questions 1-4 using the information below.
Here is the cash flow of project A. Assume the discount rate is 15%.
Year0 (initial cost): -15000
Year1: 5000
Year2: 6000
Year3: 7000
Year4: 7000
Calculate the payback period.
| A. | 3 | |
| B. | 2 | |
| C. | 2.57 | |
| D. | 3.57 |
2. Calculate the discounted payback period.
| A. | 3.64 | |
| B. | 2.57 | |
| C. | 3.21 | |
| D | 3.38 |
3. Calculate NPV and based on that decide about the project.
| A. | $2,490 - reject | |
| B. | $2,490 - accept | |
| C. | $1,440 - accept | |
| D. | $1,440 - reject |
4. I calculated the NPV of this project using three different discount rates and the results are the following:
NPV @ 20% discount rate = $760
NPV @ 25% discount rate = -$708
NPV @ 30% discount rate = -$1966
Whats your estimate of this projects IRR?
| A | Between 25% and 30% | |
| B. | Greater than 30% | |
| C | Less than 20% | |
| D. | Between 20% and 25% |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Accounting
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
27th edition
978-1337272094, 1337272094, 978-1337514071, 1337514071, 978-1337899451
