Question

comparing all methods. Risky Business is looking at a proiect with the following estimated cash flow. RISKY buon wants to know the payback period, NPV, IRR. MIRR. and Pl of this project. The appropriate discount rate for the project is reject the project under the five different decision models. termine whether the management at Risky Business will accept or What is the payback period for the new project at Risky Business? years (Round to two decimal places.) (Select from the drop-down menu.) Under the payback period, this project would be (1) - What is the NPV for the project at Risky Business? (Round to the nearest cent.) Under the NPV rule, this project would be (2) - (Select from the drop-down menu.) What is the IRR for the new project at Risky Business? % (Round to two decimal places.) (Select from the drop-down menu.) Under the IRR rule, this project would be (3) – - What is the MIRR for the new project at Risky Business? % (Round to two decimal places.) (Select from the drop-down menu.) Under the MIRR rule, this project would be (4) - What is the PI for the new project at Risky Business? (Round to two decimal places.) Under the Pl rule, this project would be (5) (Select from the drop-down menu.) 1: Data Table (Click on the following icon in order to copy its contents into a spreadsheet.) Initial investment at start of project: $12,700,000 Cash flow at end of year one: $2,286,000 Cash flow at end of years two through six: $2,540,000 each year Cash flow at end of years seven through nine: $2,971,800 each year Cash flow at end of year ten: $2,122,714 (2) O (3) O (1) O rejected accepted rejected accepted accepted rejected (4) O accepted O rejected (5) O rejected O accepted

Answer 1

: fix B41 2A x в =IRR(B29:B40) с Year Cash flows 28 29 0 $ 30 1 $ 31 32 33 34 2 $ 3 $ 4 $ 5 $ 6 $ 7 $ 8 $ 9 $ 10 $ (12,700,000) 2,286,000 2,540,000 2,540,000 2,540,000 2,540,000 2,540,000 2,971,800 2,971,800 2,971,800 2,122,714 PVIF@9% в | 1.000 $ 0.917 $ 0.842 $ 0.772 $ 0.708 $ 0.650 $ 0.596 $ 0.547 $ 0.502 $ 0.460 $ 0.422 $ Simple cumulative Present value cash flows AⓇB (12,700,000.00) $ (12,700,000) 2,097,247.71 $ (10,414,000) 2,137,867.18 $ (7,874,000) 1,961,346.04 $ (5,334,000) 1,799,400.04 $ (2,794,000) 1,650,825.72 $ (254,000) 1,514,519.01$ 2,286,000 1,625,676.37 $ 5,257,800 1,491,446.21 $ 8,229,600 1,368,299.28 $ 11,201,400 896,657.33 $ 13,324,114 36 37 38 39 IRR 15.30%| NPV $ 3,843,284.88 Payback period MIRR 11.92% =MIRR(B29:B39,9%,9%) 5.10 Years =5+254000/2540000 47 Profitabilty index (PI) 1.30 =1+3843284.88/12700000 48 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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