Question 10

A firm is analyzing a new investment with the following cash flows:

Projected Cash Flows:

• Year 0: -$180,000
• Year 1: $40,000
• Year 2: $50,000
• Year 3: $60,000
• Year 4: $70,000
• Year 5: $80,000

Requirements:

1. Calculate the cumulative cash flow for each year.
2. Determine the payback period.
3. Compute the NPV at a 9% discount rate.
4. Calculate the IRR.
5. Assess the project using the payback period, NPV, and IRR criteria.

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Type somethingQuestion 1

Suppose a company invests $200,000 in a new project. The expected annual net cash flows and the company's cost of capital (12%) are given below. Calculate the project's NPV, IRR, and payback period. Comment on the results.

Cash Flows:

• Year 1: $50,000
• Year 2: $60,000
• Year 3: $70,000
• Year 4: $80,000
• Year 5: $90,000
• Salvage Value: $30,000

Requirements:

1. Calculate the Net Present Value (NPV).
2. Calculate the Internal Rate of Return (IRR).
3. Determine the Payback Period.
4. Comment on the financial feasibility of the project.