A) Project K costs $48,152.88, its expected cash inflows are $10,000 per year fo

Question

A) Project K costs $48,152.88, its expected cash inflows are $10,000 per year for 10 years, and its WACC is 9%. What is the project's IRR? Round your answer to two decimal places.

B) Project K costs $35,000, its expected cash inflows are $11,000 per year for 7 years, and its WACC is 13%. What is the project's NPV? Round your answer to the nearest cent.

C) Project K costs $35,000, its expected cash inflows are $10,000 per year for 8 years, and its WACC is 9%. What is the project's discounted payback? Round your answer to two decimal places.

Explanation / Answer

Answer: For project-A WACC = 10% Year Cash flows 0 -48152.88 1 10000 2 10000 3 10000 4 10000 5 10000 6 10000 7 10000 8 10000 9 10000 10 10000 so IRR = 16.10% For project-B WACC = 13% Year Cash flows 0 -35000 1 11000 2 11000 3 11000 4 11000 5 11000 6 11000 7 11000 so NPV = $13,648.71 For Project-C WACC = 9% Years Cash Flows PV of cash flows Cumulative cash flows 0 -35000 -35000 1 10000 $9,174.31 $9,174.31 2 10000 $8,416.80 $17,591.11 3 10000 $7,721.83 $25,312.95 4 10000 $7,084.25 $32,397.20 5 10000 $6,499.31 $38,896.51 6 10000 $5,962.67 $44,859.19 7 10000 $5,470.34 $50,329.53 8 10000 $5,018.66 $55,348.19 Cash to be recovered = $35,000 Cash of $32397.20 is recovered in 4 years Remaining amount to be recovered = $35000 -$32397.2 = $2,603 Now, $38896.51 is recovered in = 12 months $2603 will be recovered in = 0.80299273 months So Discounted payback period = 4 years and 0.80299 months

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