Here,
Expected net cash flow in Period t is “
Required
IRR of a project is calculated using a financial calculator. All financial calculators have an inbuild cash flow register, Cash flows in accordance of the timeline and with proper +/- signs should be input, then press the key labelled “IRR”. It will return the internal rate of return of the project.
Discounted payback period is the length of the time it takes for the project’s discounted cash flows to be repaid. In other words, it captures the number of years to recover the investment in the project. A project with lower discounted payback period as compared to the project’s useful life, should be accepted.
Three independent projects have been analysed by three interns with NPV, IRR and discounted payback period of each is provided. Inter A’s project has a project life of 7 years, NPV of $5,300, IRR of 12% and discounted payback period of 6.8 years. Intern J has a project life of 6 years, NPV of -$1,800, IRR of 8% and discounted payback period of 5.8 years whereas, Intern K has project life of 10 years, NPV of $4,500, IRR of 10% and discounted payback period of 9.6 years.
Want to see the full answer?
Check out a sample textbook solution
- FILE HOME INSERT Calibri Paste Clipboard BIU Font A1 1 2 34 сл 5 6 Calculating interest rates - Excel PAGE LAYOUT FORMULAS DATA 11 Α΄ Α΄ % × fx A B C 4 17 REVIEW VIEW Alignment Number Conditional Format as Cell Cells Formatting Table Styles▾ Styles D E F G H Solve for the unknown interest rate in each of the following: Complete the following analysis. Do not hard code values in your calculations. All answers should be positive. 7 8 Present value Years Interest rate 9 10 11 SA SASA A $ 181 4 $ 335 18 $ 48,000 19 $ 40,353 25 12 13 14 15 16 $ SA SA SA A $ Future value 297 1,080 $ 185,382 $ 531,618arrow_forwardB B Canning Machine 2 Monster Beverage is considering purchasing a new canning machine. This machine costs $3,500,000 up front. Required return = 12.0% Year Cash Flow 0 $-3,500,000 1 $1,000,000 2 $1,200,000 3 $1,300,000 4 $900,000 What is the value of Year 3 cash flow discounted to the present? 5 $1,000,000 Enter a response then click Submit below $ 0 Submitarrow_forwardFinances Income Statement Balance Sheet Finances Income Statement Balance Sheet Materia Income Statement Balance Sheet FY23 FY24 FY23 FY24 FY23 FY24 Sales Cost of Goods Sold 11,306,000,000 5,088,000,000 13,206,000,000 Current Current Assets 5,943,000,000 Other Expenses 4,523,000,000 5,283,000,000 Cash 211,000,000 328,600,000 Liabilities Accounts Payable 621,000,000 532,000,000 Depreciation 905,000,000 1,058,000,000 Accounts 502,000,000 619,600,000 Notes Payable 376,000,000 440,000,000 Earnings Before Int. & Tax 790,000,000 922,000,000 Receivable Interest Expense 453,000,000 530,000,000 Total Current Inventory 41,000,000 99,800,000 997,000,000 972,000,000 Taxable Income 337,000,000 392,000,000 Liabilities Taxes (25%) 84,250,000 98,000,000 Total Current 754,000,000 1,048,000,000 Long-Term Debt 16,529,000,000 17,383,500,000 Net Income Dividends 252,750,000 294,000,000 Assets 0 0 Fixed Assets Add. to Retained Earnings 252,750,000 294,000,000 Net Plant & 20,038,000,000 21,722,000,000…arrow_forward
- Do you know what are Keith Gill's previous projects?arrow_forwardExplain why long-term bonds are subject to greater interest rate risk than short-term bonds with references or practical examples.arrow_forwardWhat does it mean when a bond is referred to as a convertible bond? Would a convertible bond be more or less attractive to a bond holder than a non-convertible bond? Explain in detail with examples or academic references.arrow_forward
- Alfa international paid $2.00 annual dividend on common stock and promises that the dividend will grow by 4% per year, if the stock’s market price for today is $20, what is required rate of return?arrow_forwardgive answer general accounting.arrow_forwardGive me answers in general financearrow_forward
- General Finance Question Solution Please with calculationarrow_forwardGeneral Financearrow_forwardAs CFO for Everything.Com, you are shopping for 6,000 square feet of usable office space for 25 of your employees in Center City, USA. A leasing broker shows you space in Apex Atrium, a 10-story multitenanted office building. This building contains 360,000 square feet of gross building area. A total of 54,000 square feet is interior space and is nonrentable. The nonrentable space consists of areas contained in the basement, elevator core, and other mechanical and structural components. An additional 36,000 square feet of common area is the lobby area usable by all tenants. The 6,000 square feet of usable area that you are looking for is on the seventh floor, which contains 33,600 square feet of rentable area, and is leased by other tenants who occupy a combined total of 24,000 square feet of usable space. The leasing broker indicated that base rents will be $30 per square foot of rentable area Required: a. Calculate total rentable area in the building as though it would be rented to…arrow_forward
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning