Question

Use the information in the table below for the following 5 questions. A capital investment project is estimated to have the following after-tax cash the following after-tax cash flows, by year 0 -S50,000 $15.000 $17.500 517.500 som $25,000 Reorder Form The company utilizes a discount rate of 20 Pany utilizes a discount rate of 20% to evaluate capital projects. You may have rounding errors in your calculations so choose the closest Sin your calculations so choose the closest answer. Assume cash flows are received equally over the year. 7) The NET PRESENT VALUE for the project shown above is: a) $4.789 b) $2,076 c) -$3,163 d) -$10.958 e) $0 8) The INTERNAL RATE OF RETURN for the project shown above is: a) 3.92% b) 16.88% c) 14.27% d) 15.41% e) No IRR 9) The PROFITABILITY INDEX for the project shown above is: a) 0.93 b) 0.89 c) 1.04 d) 2.15 e) 0.78 10) The PAYBACK for the project shown above is: a) 2.16 b) 3.66 c) 3.15 d) 3.00 e) Does not pay back

Answer 1

The following Are the Correct Answers

Questiion No (7) :- Correct Answer is (c) :- $ -3163

Questiion No (8) :- Correct Answer is (b) :- 16.88%

Questiion No (9) :- Correct Answer is (a) :- .93

Questiion No (10) :- Correct Answer is (d) :- 3

Questiion No (11) :- Correct Answer is (e) :-Does not pay back

Calculations for your Refrence

Question no (7) NPV and Question no (8) IRR

Question No 7 Calculation of NPL pu@ 20%. years Cash Infows 12.300 15000 17500 17500 2 SODU 12152.77 10 127.31 12056.32 46836.4 -soon Tess prof cash sut flow - 3163.6 gufow Question to 8. IRL all is the rate at which pu of Cash is equal to the pr of cash out flows In the ginen Case IRR is 16.88 % fast inflows po @ 16,88% 1500 12833.67 12810.25 10900:17 13396.13 Soooo. 22 pe of Cash inflows @ 168 resti nosti با کرهقه

Question no 9, 10 and 11

Question No 6 pofitability judex = PV of cash flows nitial Invest 46836,4 SO00 = .93 Question to Pay back pesjo4 Ap»ј•4, yre Cash flows cash flows 1500 Cumulative 15000 32500 12500 pay back 17500 2500 500 75 000 is 3 yrs question No - DISCOUNTED pay back period since the prof discounted cash flows is less than the guital Investment So. Does not pay back