14.1 Winston Clinic is evaluating a project that costs $52,125 and has expected net cash inflows of $12,000 per year for eight years. The first inflow occurs one year after the cost outflow, and the project has a cost of capital of 12 percent.

a. What is the project's payback?

b. What is the project's NPV? Its IRR? Its MIRR?

c. Is the project financially acceptable? Explain your answer.

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Hint for Problem 14.1:

The cash flows from the project should look like this;

Year Annual Cash Flows Cumulative Cash Flows

0 ($52,125) ($52,125)

1 12,000 (40,125)

2 12,000 (28,125)

3 12,000 (16,125)

4 12,000 (4,125)

5 12,000 7,875

6 12,000

7 12,000

8 12,000

A) Now, above cumulative cash flows show that the project breaks even in between year 4 and 5. Please do the calculation to find out exactly when is the payback period.

For B&C just use excel program to find out NPV, IRR and MIRR of the project. Then analyze the results, what they mean? whether we should accept or reject the project...