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I need help for this assignment. Explanations and answers. Thank you! 1. Given the following streams of cash flows Years: 0 Cash flows: -100,000 1
I need help for this assignment. Explanations and answers. Thank you!
1. Given the following streams of cash flows Years: 0 Cash flows: -100,000 1 2 3 4 +50,000 +50,000 -25,000 +50,000 A) Calculate the Pay Back Period. B) Calculate the discounted Pay Back Period at 5% required rate of return. ( in whole years) C) Calculate the NPV. ( @ 5% required rate) D) Calculate the Profitability Index. (@ 5% required rate) E) Explain why we should not use IRR as a technique in this problem. 2. You are given the following three projects: Initial Outlay Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 Project A -50,000 Project B -100,000 Project C -450,000 10,000 15,000 20,000 25,000 30,000 125,000 25,000 25,000 25,000 __ 200,000 200,000 200,000 __ __ 1 of 3 A) Calculate the Pay Back Period of each project. B) Calculate the NPV of each project at 10% cost of capital. C) Calculate the PI of each project at 10% cost of capital. D) Calculate the IRR of each project. E) If you have a constraint to recover the initial investment amount within two years, which project would you choose? F) If your WACC is 18%, which project(s) would you choose? ( Ignore the difference in the lives of the projects) G) If your budget constraint was 200,000, and all these projects were independent, which project(s) would you choose? 2 of 3 H) If your budget constraint was 200,000, and these projects were mutually exclusive, which project(s) would you choose? 3 of 3Step by Step Solution
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