Question
OWL, Inc. is considering a new capital budgeting project (the Investment).The Investment will cost $102,030.02 that must be invested today, and $105,000.00 that must be
OWL, Inc. is considering a new capital budgeting project (the "Investment").The Investment will cost $102,030.02 that must be invested today, and $105,000.00 that must be invested at the end of year one.
The Investment will have the following after-tax cash inflows at the end of each of the next three years.Year 1:$50,000; Year 2:$75,000; and Year 3: $100,000.
The projected financial accounting net income for each of the next three years is as follows:Year 1:$25,000; Year 2:$50,000; and Year 3: $75,000
Assume all cash flows, except for the initial investment, occur at the end of the year.
OWL's cost of capital (discount rate) is 5% per year.
1.What is the Payback Period for the total amount invested?
2.What is the Present Value of the Investment's Cash Inflows?
3.What is the Present Value of the Investment's Cash Outflows?
4.What is the Net Present Value of the Investment?
5.What is the Investment's Internal Rate of Return? ___________________
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