Question
An organization has four investment proposals with the following costs and expected cash inflows: Expected Cash Inflows Project Cost End of year 1 End of
An organization has four investment proposals with the following costs and expected cash inflows:
Expected Cash Inflows | ||||
Project | Cost | End of year 1 | End of year 2 | End of year 3 |
A | Unknown | $10,000 | $10,000 | $10,000 |
B | $20,000 | 5,000 | 10,000 | 15,000 |
C | 25,000 | 15,000 | 10,000 | 5,000 |
D | 30,000 | 20,000 | Unknown | 20,000 |
Additional information
Discount rate | Number of periods | Present value of $1 due at the end of n periods | Present value of an annuity of $1 per period for n periods |
5% | 1 | 0.9524 | 0.9524 |
5% | 2 | 0.9070 | 1.8594 |
5% | 3 | 0.8638 | 2.7232 |
10% | 1 | 0.9091 | 0.9091 |
10% | 2 | 0.8264 | 1.7355 |
10% | 3 | 0.7513 | 2.4869 |
15% | 1 | 0.8696 | 0.8696 |
15% | 2 | 0.7561 | 1.6257 |
15% | 3 | 0.6575 | 2.2832 |
a) If Project A has an internal rate of return (IRR) of 15%, then cost is?
b) If the discount rate is 10%, the net present value (NPV) of Project B is?
- c) what is the payback period of Project C ?
- d) If the discount rate is 5% and the discounted payback period of Project D is exactly two years, then the year two cash inflow for Project D is?
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