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    Calculating payback, discounted payback and IRR

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    1. Stern Associates is considering a project that has the following cash flow data. What is the project's payback?

    Year 0 1 2 3 4 5
    Cash flows -$1,100 $300 $310 $320 $330 $340

    A. 2.31 years
    B. 2.56 years
    C. 2.85 years
    D. 3.16 years
    E. 3.52 years

    2. Oranges Inc. is considering a project that has the following cash flow and Cost of Capital data. What is the project's discounted payback?

    Cost of Capital: 10.00%
    Year 0 1 2 3 4
    Cash flows -$950 $525 $485 $445 $405

    A. 1.61 years
    B. 1.79 years
    C. 1.99 years
    D. 2.22 years
    E. 2.44 years

    3. Maxwell Food is considering a project that has the following cash flow data. What is the project's IRR?

    Year 0 1 2 3 4 5
    Cash flows -$9,500 $2,000 $2,025 $2,050 $2,075 $2,100

    A. 2.08%
    B. 2.31%
    C. 2.57%
    D. 2.82%
    E. 3.10%

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    https://brainmass.com/business/internal-rate-of-return/calculating-payback-discounted-payback-and-irr-469102

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    Solution Preview

    Please refer attached file for better understanding of formulas.

    Problem 1

    Year Cash In flows Cumulative cash inflow
    1 $300 $300
    2 310 610
    3 320 930
    4 330 1,260
    5 ...

    Solution Summary

    There are 3 problems. Solutions describe the methodology to calculate project's payback period, discounted payback period or IRR as the case may be.

    $2.19

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