Question

DETTE TIRER Essay Long Answer question Chapter 57 Use the following information to answer questions 17 to 23. For all questions credit will only be given if you provide numerical support for your decision. You are the CFO of XYZ Co that prints textbook using an outdated system. The owner provides you with the following information about a new super modification project 'Alpha that will last for 4 years. The project requires a new machine that costs $900.000 today. The cash flows from the project are $0 in year 1.$406 400 in year 2, $412,000 in year 3, and $450,400 in year 4. The required rate of return is 10 percent. What is the Payback Period for the project? Will you accept the project it the benchmark Payback Period is 3 years 1 months? Does the Payback period, Discounted Payback Period, NPV, IRR, Piratio and MIRR given you the same accept/reject decision. Discuss the limitations of the methods that give you a decision different than that of the NPV. Compute the MIRR of the project given the reinvestment rate is 13%? Using MIRR, will you accept the project?

Answer 1

educators Apewa_1 Parti Payback period Initial anvestment : & 900, ODO Call How year CF : Cash Flow year 2 CF: Cash flow year 2 (Ez: Cash Flowo yoouh (fu 80 1406400 $ 412000 $ 450 400 earindo Pawback poriod ils the duration by which the company's cash flow is equal to initial investment co cash flow earned till year 3 as 8 + 406400 + 412000 = $ 818h00 Ascuming coc earn equally in year 4, the duration to earn semalung amount ($900000 - $828400 = $81, 600) is = 81,600 0.181 years 450,400 so payback period is = 3 + 0.181 year = 3:181 yours = 3 years at months 2 the benchmark payback pecod 3 years and 1 monthe then should not accept the project the payback preuod is more benchmark payback period is CEO as .. than