1. Project K costs $50,000, its expected cash inflows are $14,000 per year for 9

Question

1. Project K costs $50,000, its expected cash inflows are $14,000 per year for 9 years, and its WACC is 12%. What is the project's payback? Round your answer to two decimal places.

2. Project K costs $40,000, its expected cash inflows are $9,000 per year for 8 years, and its WACC is 11%. What is the project's discounted payback? Round your answer to two decimal places.

3. Project K costs $50,000, its expected cash inflows are $8,000 per year for 12 years, and its WACC is 9%. What is the project's NPV? Round your answer to the nearest cent.

Explanation / Answer

1) Cash outflows    50,000.00 Cash Inflows per Year    14,000.00 Cash inflows in first 3 years    42,000.00 Cash inflows required in 4 th year to cover cash outflow      8,000.00                           0.57 Payback period = 3+ 8000/14000 3.57 Years 2) Statement showing cash flows Particulars Time PVF Amount PV Cash Outlows                   -                  1.0000              (40,000.00)              (40,000.00) PV of Cash Outflows              (40,000.00) Cash Inflows              1.00                     0.90                   9,000.00                   8,108.11 Cash Inflows              2.00                     0.81                   9,000.00                   7,304.60 Cash Inflows              3.00                     0.73                   9,000.00                   6,580.72 Cash Inflows              4.00                     0.66                   9,000.00                   5,928.58 Cash Inflows              5.00                     0.59                   9,000.00                   5,341.06 Cash Inflows              6.00                     0.53                   9,000.00                   4,811.77 Cash Inflows              7.00                     0.48                   9,000.00                   4,334.93 Cash Inflows              8.00                0.4339                   9,000.00                   3,905.34 PV of Cash Inflows                   -                  46,315.10 NPV                   6,315.10 Cash inflows in first 6 years    38,075.00 Cash inflow required in 7 year      1,925.00 Discounted Payback period = 6 + 1925/4335 6.44 Years 3) Statement showing cash flows Particulars Time PVF Amount PV Cash Outlows                   -                  1.0000              (50,000.00)              (50,000.00) PV of Cash Outflows              (50,000.00) Cash Inflows              1.00                     0.92                   8,000.00                   7,339.45 Cash Inflows              2.00                     0.84                   8,000.00                   6,733.44 Cash Inflows              3.00                     0.77                   8,000.00                   6,177.47 Cash Inflows              4.00                     0.71                   8,000.00                   5,667.40 Cash Inflows              5.00                     0.65                   8,000.00                   5,199.45 Cash Inflows              6.00                     0.60                   8,000.00                   4,770.14 Cash Inflows              7.00                     0.55                   8,000.00                   4,376.27 Cash Inflows              8.00                0.5019                   8,000.00                   4,014.93 Cash Inflows              9.00                0.4604                   8,000.00                   3,683.42 Cash Inflows            10.00                0.4224                   8,000.00                   3,379.29 Cash Inflows            11.00                0.3875                   8,000.00                   3,100.26 Cash Inflows            12.00                0.3555                   8,000.00                   2,844.28 PV of Cash Inflows                   -                  57,285.80 NPV                   7,285.80

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