All techniques Rieger International is evaluating the feasibility of investing $87,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: The firm has a cost of capital of 8%. a. Calculate the payback period for the proposed investment. b. Calculate the discounted payback period for the proposed investment. c. Calculate the net present value (NPV) for the proposed investment. d. Calculate the probability index for the proposed investment. e. Calculate the internal rate of return (IRR) for the proposed investment. . f. Calculate the modified internal rate of return (MIRR) for the proposed investment. g. Evaluate the acceptability of the proposed investment using NPV, IRR, and MIRR Data table - - X

All techniques Rieger International is evaluating the feasibility of investing $87,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: The firm has a cost of capital of 8%. a. Calculate the payback period for the proposed investment. b. Calculate the discounted payback period for the proposed investment. c. Calculate the net present value (NPV) for the proposed investment. d. Calculate the probability index for the proposed investment. e. Calculate the internal rate of return (IRR) for the proposed investment. . f. Calculate the modified internal rate of return (MIRR) for the proposed investment. g. Evaluate the acceptability of the proposed investment using NPV, IRR, and MIRR Data table - - X

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 13E: Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a...

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Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
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