A) Project K costs $35,000, its expected cash inflows are $13,000 per year for 1

Question

A) Project K costs $35,000, its expected cash inflows are $13,000 per year for 11 years, and its WACC is 14%. What is the project's NPV? Round your answer to the nearest cent.

B) Project K costs $60,000, its expected cash inflows are $13,000 per year for 8 years, and its WACC is 14%. What is the project's payback? Round your answer to two decimal places.

C)Project K costs $60,000, its expected cash inflows are $14,000 per year for 8 years, and its WACC is 13%. What is the project's discounted payback? Round your answer to two decimal places.

Explanation / Answer

A) NPV = 13000 * PVIFA( 11 , 14%) - 35000 = 13000 * 5.4527 - 35000 =35885.10

B) Payback Period = 4 years + Balance Remaining In Next Year/ Cash Flow of that year

= 4 years + (60000 - 52000) / 13000 = 4.62 years

C) Discounted Cash Flows Till Year 6 = 14000 * PVIFA( 6, 13%) = 14000 * 3.9975 = 55965

Discounted Cash Flow of year 6 = 5951.40

Payback Period = 6 years + (60000 - 55965) * 5951.40 = 6.68 years

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