You have been working to get a business plan together whereby you can market hyd

Question

You have been working to get a business plan together whereby you can market hydrogen converters for cars. Because the efficiencies will come with automation, there is an up-front investment of $2,000,000. The projected cash flows for the project are shown below. Assume that your start up company will have a WACC of 20%. If you do not show your work for the problems below, please indicate your inputs on the calculator. Year 0 (investment) -$2,000,000 Year 1 -$ 300,000 Year 2 $ 700,000 Year 3 $ 900,000 Year 4 $1,400,000 Year 5 $2,000,000 What is the NPV of this project? What is the IRR for this stream of cash flows? What is the MIRR? What is the payback period?

Explanation / Answer

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cash outflow -2000000 -300000 Cash inflow -2000000 -300000 700000 900000 1400000 2000000 Discounting factor 1 0.833333 0.694444 0.578704 0.482253086 0.401878 Present value of cash flows -2000000 -250000 486111.1 520833.3 675154.321 803755.1 Net present value 235853.9095 IRR 23% Payback period 4.5 years

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