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Present Value Analysis

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Blanchford Enterprises is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected.
Year: 0 1 2 3

Cash flows: -$1,000 $450 $450 $450

12%
16.65%
19.10%
21.55%
25%

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Edison Electric Systems is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's projected NPV can be negative, in which case it will be rejected.

WACC = 10%

Year: 0 1 2 3

Cash flows: -$1,000 $450 $460 $470

a. $142.37

b. $151.59

c. $166.51

d. $173.26

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The Seattle Corporation has an investment opportunity that will yield cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost $150,000 today, and the firm's WACC is 10%. What is the payback period for this investment?

a. 5.23 years

b. 4.86 years

c. 4.00 years

d. 6.12 years

e. 4.35 years

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1. Use the IRR formula in Excel to get 16.65%. You can also use a financial calculator to solve this problem. However, because ...

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