Question

Provide your solutions in sequential order below the line. Round final answer to the nearest hundredth. Show all work and circle your final answer. You are analyzing a project which has a $20,000 sunk cost. The project's cost is $150,000 and the expected cash flows are: (Use this info for questions #1-4) Year 1: $60,000 Year 2: $0 Year 3: $100,000 Year 4: $0 Year 5: $60,000 The discount rate is 18% (the required return is also 18%). The required payback is 2.3 years. 1. Calculate the internal rate of return (must have correct set-up and your answer should be between two consecutive whole percentages). Accept or reject? 2. Calculate the discounted payback period. Accept or reject? 3. Calculate the payback period. Accept or reject? 4. Calculate the NPV. Accept or reject? Yr 5. A project will cost $95,000 today and there will be an additional cost in year 3 of $15,000. The project will have the following projected cash flows: Cash Flow $30,000 $50,000 $0 $50,000 The discount rate is 14%. Calculate the modified internal rate of return. Do you accept or reject? (Must have correct set-up and your answer should be between two consecutive whole percentages.)

Answer 1

As per rules I am answering the first 4 subparts of the question

Sub Part
1	IRR	14.36%	Reject since IRR is less than cost of capital
2	Discounted Payback	Never	Reject since Discounted Payback is never
3	Payback	2.90	reject since Payback period is more than that required
4	NPV	-12062.90	reject since NPV is negative

Workings

Year	Cash flows	Cumulative CF	DCF	Cumulative DCF
0	-150000	-150000	-150000.00	-150000.00
1	60000	-90000	50847.46	-99152.54
2	0	-90000	0.00	-99152.54
3	100000	10000	60863.09	-38289.46
4	0	10000	0.00	-38289.46
5	60000	70000	26226.55	-12062.90

AutoSave o 9.3HD Book1 - Excel Sign in File Home Insert Draw Page Layout Formulas Data Review View Help Tell me what you want to do A = = 0 -A A = E Insert - Delete - Format Paste L- - 0 X Share Comments AY O Sort & Find & Filter - Select Editing General 3$ -% to Number - Calibri - 11 BIU - B Font - x . Conditional Format as Formatting Table - Styles Cell Styles Alignment Cells Clipboard ci fc Year A B H Cash flows -150000 60000 Cumulative CF =D2 =E2+D3 =E3+D4 =E4+D5 =E5+D6 =E6+D7 F DCF Cumulative DCF =D2/1.18^C2 =F2 =D3/1.184C3 =G2+F3 =D4/1.184C4 =G3+F4 =D5/1.184C5 =G4+F5 =D6/1.184C6 -G5+F6 =D7/1.184C7 =G6+F7 100000 60000 Sub Part 1 2 3 4 IRR =IRR(D2:07) Reject since IRR is less than cost of capital Discounted Payback Never Reject since Discounted Payback is never Payback =C4-E4/D5 reject since Payback period is more than that required NPV =NPV(18%,D3:07)+D2 reject since NPV is negative 17 Sheet1 Ready E -- ENG Q A 10:07 PM 0