Question
Question 10 A firm is evaluating a project that requires an initial investment of $300,000. The project's cash flows over 5 years and the firm's
Question 10
A firm is evaluating a project that requires an initial investment of $300,000. The project's cash flows over 5 years and the firm's cost of capital (8%) are given below. Compute the NPV, IRR, and payback period. Provide a recommendation based on the results.
Cash Flows:Year | Cash Flow ($) |
1 | 50,000 |
2 | 60,000 |
3 | 70,000 |
4 | 80,000 |
5 | 90,000 |
- Calculate the NPV.
- Determine the IRR.
- Calculate the payback period.
- Provide a recommendation based on the financial analysis.
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Question 1
Given the following cash flows for Project A and Project B:
Year | Project A | Project B |
0 | -50000 | -120000 |
1 | 12000 | 20000 |
2 | 15000 | 25000 |
3 | 18000 | 30000 |
4 | 22000 | 35000 |
5 | 25000 | 40000 |
6 | 30000 | 50000 |
Requirements: a. Calculate the NPV for both projects assuming a required rate of return of 10%. b. Determine the IRR for each project. c. Calculate the traditional payback period for both projects. d. If the projects are independent, which project(s) should be selected? Explain. e. If the projects are mutually exclusive, which project should be selected? Explain.
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