Question 1: A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. What is the project's NPV (Hint: Begin by constructing a time line.)
Question 2: Refer to Problem above. What is the Project's IRR?
Question 3: Refer to Problem above, What is the project's MIRR?
Question 4: Refer to Problem above, What is the project's PI?
Question 5: Refer to Problem above, What is the project's payback period?
Question 6: Refer to Problem above, What is the project's discounted payback period?
Question 7: Your division is considering two investment projects, each of which requires an up-front expenditure of $15 million. You estimate that the investments will produce the following net cash flows:
Year Project A Project B
1 $5,000,000 $20,000,000
2 10,000,000 10,000,000
3 20,000,000 6,000,000
a. What are the two projects' net present values, assuming the cost of capital is 5%? 10%? 15%?
b. What are the two projects' IRRs at these same costs of capital?