ENTR 302 Capital Budgeting Homework Lisa Bergeron You must show work on all of your problems and box your final answer Cash Flow (S4 4,600) $1,025 $1,750 $2,050 2.795 I. Using the cash flows from above and a required return of 10%: a. Calculate the NPV ACCEPT REJECT b. Calculate the IRR ACCEPT REJECT c. Calculate the Payback ENTR 302-Capital Budgeting Homework-Page 2. Lisa's Cookies has estimated its first 5 years of cash flows at Year #1 S50,000 2$65,000 $83,000 $100,000 S $125,000 After year 5 cash flows should grow at 2% forever. Lisa's cost of capital is 8%. a) What is the most she should invest in starting up her business? Lisa finds that she needs $800,000 to start up her business. What is the NPV? Should she accept or reject the project? b) c) What is the IRR on the project? A project has an IRR of 12% and a required return of 15%. Should this project be accepted or rejected? Please explain your answer 3, ENTR 302-Capital Budgeting Homework-Page #2 4. Calculate the NPV and IRR for Projects #1 and #2. The required return for both projects is 12%. These projects are mutually exclusive. Indicate if I should accept Project #1, Project #2 or both Projects. Year | Project #1 | Project 0 (S165,000)(344,000 $50,000 S65,000 $83,000 $100,000 $89,000 $112,000 $175,000 5 $125,000 $219,000