Calculate the Net Present Value (NPV) of the following cash flow stream if the required rate is 12%:

Year Cash Flow

0 (230,000)

1 60,000

2 60,000

3 60,000

4 60,000

5 60,000

Is this a good project for the business to accept? Explain why or why not.

(2)

Calculate the Net Present Value (NPV) of the following cash flow projections based on a required rate of 10.5%:

Year Cash Flow

0 (120,000)

1 35,000

2 47,500

3 55,000

4 62,000

Is this a good project for the business to accept? Explain why or why not.

(3)

Project A

Year Cash Flow

0 -800,000

1 220,000

2 265,000

3 292,000

4 317,000

Project B

Year Cash Flow

0 -650,000

1 175,000

2 175,000

3 175,000

4 175,000

5 175,000

(4)

Calculate the internal rate of return (IRR) of the following cash flows:

Year Cash Flow

0 (1,650,000)

1 330,000

2 365,000

3 380,000

4 415,000

5 405,000

6 370,000

7 294,000

Answer:

(5)

If a company has a required rate of return of 15%, should the following project be accepted based on these expected cash flows below?

Year Cash Flow

0 (274,000)

1 68,000

2 73,000

3 76,500

4 78,000

5 82,500

6 77,000

Please explain why or why not the company should move forward with this endeavor.

(6)

Based on the investor expectations of earning at least 12%, should this projected below be completed?

Year Cash Flow

0 (133,000)

1 37,000

2 42,750

3 44,000

4 46,500

5 82,500

6 77,000

Please explain why or why not the company should move forward with this endeavor.