A project has an initial cost of $45,000. The incremental inflows associated with the project are $20,000 in year 1, $15,000 in year 2, $10,000 in year 3 and $8,000 in year 4. All cash inflows are at the end of the year. The appropriate discount rate for this project is 8.0%. (HINT: Possibly use Excel Worksheet)
- What is the project’s payback period?
a. 5.00 Years
b. 3.00 Years
c. 8.00 Years
d. 7.00 Years - What is the project’s discounted payback period?
a. 2.87 Years
b. 3.97 Years
c. 10.25 Years
d. 6.75 Years - What is the project’s net present value?
a. $197.16
b. $278.96
c. $345.21
d. $225.35 - What is the project’s internal rate of return? Calculate to two decimal places.
a. 3.52%
b. 8.23%
c. 5.35%
d. 2.75% - What is the project’s modified internal rate of return? Calculate to two decimal places.
a. 3.52%
b. 7.60%
c. 5.35%
d. 8.12%
A project has an initial cost of $45,000. The incremental inflows associated with the project are $20,000 in year 1, $15,000 in year 2, $10,000 in year 3 and $8,000 in year 4. All cash inflows are at the end of the year. The appropriate discount rate for this project is 8.0%. The component costs of capital and their weights are given below: - What is the project’s weighted-average cost of capital?
kd = 10% wd = 45%
kp = 5% wp = 10%
ke = 8% we = 45%
T = 40%
a. 6.8%
b. 2.4%
c. 4.3%
d. 8.5%
