19. Payback Period and IRR Suppose yor happroject with a payback period the project? Suppose that the payback pericd is never. What do you know Capital Budgeting PART 5 exactly equal to the life of the project. What you know about the IRR of LO 1 LO 3 20. NPV and Discount Rates An investiment has an installed cost of $781,350. The cash flows over the four-year life of the investment are projected to be $312,615, $304,172, $245,367, and $229,431. If the discount rate is zero, what is the NPV? If the discount rate is infinite, what is the NPV? At what discount rate is the NPV equal to zero? Sketch the NPV profile for this about the IRR of the project now? LO 4 investment based on these three points. 21. NPV and Payback Period Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has historically used a three-year cutoff for projects. The required return is 10 percent LO 1 LO 4 Project G Project F Year -$298,000 -$195,000 71,600 98,400 1 86,300 94,500 81,600 123,600 72,000 166,800 64,800 187,200 Calculate the payback period for both projects. a. Calculate the NPV for both projects. b. Which project, if any, should the company accept? 22. MIRR Doak Corp. is evaluating a project with the following cash flows: c. LO 5 Year Cash Flow -$32,600 11,520 14,670 1,270 10,940 The company uses an interest rate of 10 percent on all of its projects. Calcu 4,230 late the MIRR of the project using all three methods. TERMEDIATE (Questions 23-27) 0 5 23. MIRR Suppose the com of 11 O-23 O 2 345

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 8PROB

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Number 21 a, b, and c

Transcribed Image Text:19. Payback Period and IRR Suppose yor happroject with a payback period the project? Suppose that the payback pericd is never. What do you know Capital Budgeting PART 5 exactly equal to the life of the project. What you know about the IRR of LO 1 LO 3 20. NPV and Discount Rates An investiment has an installed cost of $781,350. The cash flows over the four-year life of the investment are projected to be $312,615, $304,172, $245,367, and $229,431. If the discount rate is zero, what is the NPV? If the discount rate is infinite, what is the NPV? At what discount rate is the NPV equal to zero? Sketch the NPV profile for this about the IRR of the project now? LO 4 investment based on these three points. 21. NPV and Payback Period Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has historically used a three-year cutoff for projects. The required return is 10 percent LO 1 LO 4 Project G Project F Year -$298,000 -$195,000 71,600 98,400 1 86,300 94,500 81,600 123,600 72,000 166,800 64,800 187,200 Calculate the payback period for both projects. a. Calculate the NPV for both projects. b. Which project, if any, should the company accept? 22. MIRR Doak Corp. is evaluating a project with the following cash flows: c. LO 5 Year Cash Flow -$32,600 11,520 14,670 1,270 10,940 The company uses an interest rate of 10 percent on all of its projects. Calcu 4,230 late the MIRR of the project using all three methods. TERMEDIATE (Questions 23-27) 0 5 23. MIRR Suppose the com of 11 O-23 O 2 345

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