Question
Scenario: An entrepreneur is considering an investment in a new venture. The venture requires an initial investment of $25,000 and is expected to generate the
Scenario: An entrepreneur is considering an investment in a new venture. The venture requires an initial investment of $25,000 and is expected to generate the following cash inflows:
Year | Cash Inflows |
1 | $8,000 |
2 | $9,000 |
3 | $10,000 |
4 | $11,000 |
5 | $12,000 |
The discount rate is 15%.
Requirements:
- Calculate the NPV.
- Calculate the IRR.
- Compute the Discounted Payback Period.
- Determine the PI.
- Evaluate if the venture is worth investing in.
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Valuation The Art and Science of Corporate Investment Decisions
Authors: Sheridan Titman, John D. Martin
3rd edition
133479528, 978-0133479522
