5.A project has the following total (or net) cash flows.

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YearTotal (or net) cash flow

________________________________________

1$50,000

270,000

380,000

4100,000

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The required rate of return on the project is 13 percent.The initial investment (or initial cost or initial outlay) of the project is $100,000.

a)Find the (regular) payback period of the project.

b)Compute the discounted payback period of the project.

6.A project has the following total (or net) cash flows.

__________________________________________

YearTotal (or net) cash flow

_________________________________________

1$20,000

230,000

350,000

460,000

_________________________________________

The required rate of return on the project is 15 percent.The initial investment (or initial cost or initial outlay) of the project is $80,000.

a)Find the net present value (NPV) of the project.

b)Find the profitability index (PI) of the project.

c)Calculate the modified internal rate of return (MIRR) of the project.

7.A three-year project will cost $150,000 to construct. This will be depreciated straight line to zero over the three-year life.The project is expected to generate sales of $450,000 per year.It has annual variables costs of $200,000 and annual fixed costs of $100,000 per year. The appropriate tax rate is 25 percent and the required rate of return on the project is 16 percent.Assume that a salvage company will pay $60,000 (before taxes) for the assets at the end of year 3.The project also has an initial net working capital requirement of $40,000, which is fully recoverable when the project ends.Note that the project only depreciates the $150,000 initial cost. The salvage value is excluded from depreciation. What is the project's net present value (NPV)?