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1) You work as an investment consultant for Orange Inc., a company that produces smartphones. Due to a recent decline in revenues because of weak
1) You work as an investment consultant for Orange Inc., a company that produces smartphones. Due to a recent decline in revenues because of weak sales in China, the company is taking a more strict approach to selecting projects to ensure profit maximization. You are tasked with analyzing the following project: Initial Investment Expected annual Inflows from t=1 on: Expected annual Outflows from t=1 on: Project Length Project A 1800 700 250 5 Years The discount rate for the project cash flows is 2%. a) Visualize the expected cash flows of the project in a timeline! b) Compute the NPV and payback period of the project! c) Your analytics team has computed NPVs for various other discount rates to assess potential changes in the market interest rate. Furthermore your team has derived that the internal rate of return of project A is 7.9%. 1% 3% 5% Project A NPV 384.04 260.87 148.26 -136.85 11% Based on all the information available plot the NPV function of the project in the diagram and indicate the IRR clearly! NPV Function 700.0000 600.0000 500.0000 400.0000 300,0000 200.0000 100.0000 0.0000 1.00% 3.00% 5.00% 7.00% 9.00% 11.00% 13.00% 15.00% 15.00% - 100.0000 -200.0000
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