Monster Inc. is considering a project with the following cash flows: Co C1 C2 C3 C4 (RM25,000) RM10,000 RM12,000 RM5,000 RM8,000 The company is reluctant to consider projects with paybacks of more than three years. If projects pass the payback screen, they are considered further by means of the NPV and IRR methods. The firm's cost of capital is 9%. a) What is the project's payback period and discounted payback period? Should the project be considered further? b) What is the project's NPV? Does NPV indicate acceptance on a stand-alone basis? c) Calculate the project's IRR by using an iterative approach. Start by using the cost of capital and the NPV calculation from part a. Does IRR indicate acceptance on a stand-alone basis?

Monster Inc. is considering a project with the following cash flows: Co C1 C2 C3 C4 (RM25,000) RM10,000 RM12,000 RM5,000 RM8,000 The company is reluctant to consider projects with paybacks of more than three years. If projects pass the payback screen, they are considered further by means of the NPV and IRR methods. The firm's cost of capital is 9%. a) What is the project's payback period and discounted payback period? Should the project be considered further? b) What is the project's NPV? Does NPV indicate acceptance on a stand-alone basis? c) Calculate the project's IRR by using an iterative approach. Start by using the cost of capital and the NPV calculation from part a. Does IRR indicate acceptance on a stand-alone basis?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 8P

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