Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows:

Year Project A Project B
0 -$100,000 -$100,000
1 32,000 0
2 32,000 0
3 32,000 0
4 32,000 0
5 32,000 $200,000

The required rate of return on these projects is 11%.

1. What is each project's payback period?
2. What is each project's net present value?
3. What is each project's internal rate of return?
4. What has caused the ranking conflict?
5. Which project should be accepted? Why?

Solution Preview

Please refer attached file for better clarity of tables and formulas.

Solution:

1. What is each project's payback period?
Year Cash Flows Cumulative cash flows
Project A Project B Project A Project B
0 -100000 -100000
1 32000 0 32000 0
2 32000 0 64000 0
3 32000 0 96000 0
4 32000 0 128000 0
5 32000 200000 160000 200000
Payback period is time needed to recover initial outlay.

In case of Project A, it is clear ...

Solution Summary

Solution describes the steps for calculating payback period, net present value and internal rate of returm for given projects. It also discusses ranking conflict.

Project SS costs $52,125, its expected net cash flows are $12,000 per year for 8 years, its WACC is 12%.
What is the project's NPV?
IRR?
MIRR?
Payback Period?
Discounted Payback Period?
(Show calculations)

I have an excel spreadsheet where certain areas have been left blank and need to be computed in order to complete a research paper. However, I'm not sure how to do the calculations correctly. Please help. The areas highlighted in YELLOW need to be calculated. Thank you.

Consider an investment that costs $100,000 and had a cash inflow of $25,000 every year for 5 years. The required return is 9% and required payback is 4 years.
Wwhat is the payback period?
What is the discounted payback period?
What is the NPV?
What is the IRR?
Should we accept this project?
What decision rule should b

Ch. 9: Problem A5 (p. 236)
(Investment criteria) Compute the NPV, IRR, andpayback period for the following investment. The cost of capital is 10%.
Year 0 1 2 3
Cash flow −200,000 100,000 100,000 150,000

Based on the numbers in the spreadsheet (see attachment):
What would the IRR be if NPV was 0? (for both the equity case and the leveraged case)?
And the Discounted Payback would be for how many years?

2. There are two mutually exclusive projects under consideration by the BUILDERS-R-US Company:
Year Project A Project B
0 -30,000 -50,000
1 10,000 15,000
2 10,000 15,000
3 10,000 15,000
4 10,000 15,000
The cost of capital is 10%.
Calculate the following values for each project using the time value tables and Micro

Your company uses a 12% annual rate to discount cash flows for NPV. The following table presents the costs of each investment (negative values in time zero) and the expected cash flows for each investment each year.
Period A B C
0 -500 -2000 -500
1 200 400 300
2 300 500 200
3 400 800 100
4 500 900 0
5 0 1000 0
1

Calculate the payback period and the NPV using the information below.
Cost of Capital = 13%
Initial Investment 100,000
Cash inflow 1 15,000
Cash inflow 2 20,000
Cash inflow 3 30,000
Cash inflow 4 35,000
Cash inflow 5 40,000
the IRR is closest to:

If you insulate your office for $10,000, you will save $1,000 a year in heating expenses. These savings will last forever.
a. What is the NPV of the investment when the cost of capital is 8%? 10%?
b. What is the IRR of the investment?
c. What is the payback period on this investment?
Show your work.