Jeremy Yospin Inc. has an investment project that has annual cash flows of $8,80
ID: 2641950 • Letter: J
Question
Jeremy Yospin Inc. has an investment project that has annual cash flows of $8,800, $ 9,000, $10,000, $8,700 and $9,500 in next five years, and a discount rate of 10%.
Find out the IRR, payback period, Discounted Payback period, NPV, and profitability index if the initial cost is $28,000. Should the company consider investing in the project?
Find out the IRR, payback period, Discounted Payback period, NPV, and profitability index if the initial cost is $35,000. Should the company consider investing in the project?
Complete the following table with information from (a) and (b) and discuss which project you would choose.
If initial cost is $28,000
If initial cost is $35,000
Payback Period
Discounted Payback
NPV (Net Present Value)
PI (Profitability Index)
IRR
If initial cost is $28,000
If initial cost is $35,000
Payback Period
Discounted Payback
NPV (Net Present Value)
PI (Profitability Index)
IRR
Explanation / Answer
Payback Period = Cost of Project / Annual Cash Inflows
Discounted Pay Back
profitability index = present value of future cash flows / intial investment required
The internal rate of return (IRR) on a project is the rate of return at which the projects NPV equals zero.
0 = (investments)+Cashflow at one year/(1+IRR)^1+Cashflow at second year/(1+IRR)^2......
when intial investment is 28000 than IRR is 19%.
When Intial Investment is 35000 than IRR is 9.77%.
Net Present value:
sum of present value of all cash flows - intial investment
year cashflow cumulative cashflow 0 (28,000) (28,000) 1 8,800 (19,200) 2 9,000 (10,200) 3 10,000 (200) 4 8,700 8,500 5 9,500 18,000 Payback period 3.02 yearsRelated Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.