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Belgravia Petroleum Inc. is trying to evaluate a generation project with the following cash flows:    Year  Cashflow  0  -$300,000,000  1  $63,000,000  2  $85,000,000  3  -$50,000,000  4  $145,000,000  5  $175,000,000  6  -$50,000,000  7  $70,000,000  8  $72,000,000    Construct a spreadsheet and calculate the following (the required rate of return is 12%):  Payback period  Discounted payback period  Internal rate of return (IRR) Modified IRR  The discounting approach  The reinvestment approach  The combination approach  Net present value (NPV)    Based on your analysis, should the company take the project? Why?

Belgravia Petroleum Inc. is trying to evaluate a generation project with the following cash flows:    Year  Cashflow  0  -$300,000,000  1  $63,000,000  2  $85,000,000  3  -$50,000,000  4  $145,000,000  5  $175,000,000  6  -$50,000,000  7  $70,000,000  8  $72,000,000    Construct a spreadsheet and calculate the following (the required rate of return is 12%):  Payback period  Discounted payback period  Internal rate of return (IRR) Modified IRR  The discounting approach  The reinvestment approach  The combination approach  Net present value (NPV)    Based on your analysis, should the company take the project? Why?

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 7PA: There are two projects under consideration by the Rainbow factory. Each of the projects will require...
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Belgravia Petroleum Inc. is trying to evaluate a generation project with the following cash flows: 

 

Year 
Cashflow 
0 
-$300,000,000 
1 
$63,000,000 
2 
$85,000,000 
3 
-$50,000,000 
4 
$145,000,000 
5 
$175,000,000 
6 
-$50,000,000 
7 
$70,000,000 
8 
$72,000,000 

 

  • Construct a spreadsheet and calculate the following (the required rate of return is 12%): 

    • Payback period 

    • Discounted payback period 

    • Internal rate of return (IRR)

    • Modified IRR 

    • The discounting approach 

    • The reinvestment approach 

    • The combination approach 

  • Net present value (NPV) 

 

  • Based on your analysis, should the company take the project? Why? 

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