Question

Comparing all methods. Risky Business is looking at a project with the following estimated cash​ flow:. Risky Business wants to know the payback​ period, NPV,​ IRR, MIRR, and PI of this project. The appropriate discount rate for the project is 12%.

Initial investment at start of project: $12,600,000 Cash flow at end of year one: $2,016,000 Cash flow at end of years two through six: $2,520,000 each year Cash flow at end of years seven through nine: $2,217,600 each year Cash flow at end of year ten: $1,705,846

If the cutoff period is 66 years for major​ projects, determine whether the management at Risky Business will accept or reject the project under the five different decision models.

What is the payback period for the new project at Risky​ Business?

Answer 1

B41 - A 27 Year 28 29 30 31 32 0 $ 1 $ 2 $ 3 $ 4 $ 5 $ 6 $ 7 $ 8 $ 9 $ 10 $ x V fc =IRR(B29:B40) B C Cash flows PVIF@12% А в (12,600,000) 1.000 $ 2,016,000 0.893 $ 2,520,000 0.797 $ 2,520,000 0.712 $ 2,520,000 0.636 $ 2,520,000 0.567 $ 2,520,000 0.507 $ 2,366,400 0.452 $ 2,217,600 0.404 $ 2,217,600 0.361 $ 1,705,846 0.322 $ D Present value Simple cumulative | AB (12,600,000.00) $ (12,600,000) 1,800,000.00 $ (10,584,000) 2,008,928.57 $ (8,064,000) 1,793,686.22 $ (5,544,000) 1,601,505.56 $ (3,024,000) 1,429,915.68 $ (504,000) 1,276,710.43 $ 2,016,000 1,070,439.18 $ 4,382,400 895,651.45 $ 6,600,000 799,688.79$ 8,817,600 549,236.76 $ 10,523,446 35 36 37 38 39 IRR 13.22%| NPV $ 625,762.63 Payback period 5.20 MIRR 12.54% =MIRR(B29:B39,12%,12%) Years =5+504000/2520000 Profitabilty index (PI) 1.05 =1+625762.63/12600000 50 Based on NPV 51 Based on IRR 52 Based on Payback 53 Based on MIRR 54 Based on PI Accept Accept Accept Accept Accept

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