Question
Siesta Incorporated is looking at a project and has the appropriate cash flow. However, there is much disagreement on the appropriate discount rate to use
Siesta Incorporated is looking at a project and has the appropriate cash flow. However, there is much disagreement on the appropriate discount rate to use with the project.
- Barracuda Count Dracula, the CFO, has requested that you provide the NPV at various interest rates between 0% and 40% at 2% intervals. That way when they are able to access the proper discount rate for this project they will know if the project is a go.
- In addition, you are to graph your NPV results at each interest rate to show the NPV profile of the project.
- Confirm that the IRR intersects the horizontal axis at the $0 NPV for the project.
The cash flow for the project is listed below in millions of dollars:
Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
CF | -35.05 | 3.44 | 5.79 | 9.23 | 14.68 | 18.39 | 21.07 | 16.42 | 11.68 |
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Fundamentals Of Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
13th Edition
1265553602, 978-1265553609
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