The MCSL Corp. is planning a new investment project which is expected to yield cash inflows of
Question:
The MCSL Corp. is planning a new investment project which is expected to yield cash inflows of $180,000 per year in Years 1 through 3, $225,000 per year in Years 4 through 7, and $185,000 in Years 8 through 10. This investment will cost the company $880,000 today (initial outlay). We assume that the firm's cost of capital is 7.8%.
(1) Draw a time line to show the cash flows of the project.
(2) Compute the project's payback period, net present value (NPV), and internal rate of return (IRR).
(3) Discuss whether the project should be taken.
Net Present ValueWhat is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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1 Time line of Cash Flow Years 1 2 3 4 5 6 7 8 9 10 Initial Cost 880000 Cash outflow 180000 180000 1...View the full answer
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Related Book For 
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart
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