Three parts 1 question

1)

What is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding to 2 decimals .

Year 0 cash flow = - 149000

Year 1cashflow = 39, 0/0

Year 2cashflow = 30000

Year 3 cash flow =40,000

Year 4 cash flow =30,000

Year 5 cash flow =41,000

Year 6 cash flow =37,000

Answer:

Your firm has limited capital to invest and is therefore interested in comparing projects based on the profitability index (PI), as well as other measures . What is the of the project with the estimated cash flows below? The required rate of return is 20.8% Round to 3 decimals

Year 0cashflow = - 760000

Year 1 cash flow =-130,000

Year 2 cash flow =530,000

Year 3 cash flow =430.000

Year 4 cash flow =460,000

Year 5 cash flow =490,000

Answer:

Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board of directors wants to know the expected impact on shareholder wealth. Knowing that the estimated impact on shareholder wealth equates to net present value (NPV), you use your handy calculator to compute the value. What is the project's NPV? Assume that the cash flows occur at the end of each year. The discount rate (i.e., required rate of return, hurdle rate) is 19.4%. (Round to nearest penny)

Year 0 cash flow -113,000

Year 1cash flow 42,000

Year 2 cash flow31,000

Year 3 cash flow34,000

Year 4 cash flow 38,000

Year 5 cash flow27,000

Answer :