1. NPV, IRR, Profitability Index You are reviewing a new project. The required return for assets of this risk level is 12%. The estimated cash flows are: Year 0: CF = -165,000 Year 1: CF = 63,120; Year 2: CF = 70,800; Year 3: CF = 91,080; 0 0 0 What is the NPV, IRR and the profitability index? Should you accept or reject this project? 0 0 2. Payback, Discounted Payback and AAR You are reviewing a new project. The required return for assets of this risk level is 12%. The estimated cash flows are: Year 0: CF = -165,000 Year 1: CF = 63,120; Net Income = 13,620 Year 2: CF = 70,800; Net Income = 3,300 Year 3: CF = 91,080; Net Income = 29,100 Average Book Value = 72,000 Assume we will accept the project if it pays back within two years and required AAR = 25% What is the payback period and the discounted payback period? What is the AAR? Should you accept or reject this project? 0 0