1) Easy Appliances Inc. is considering a new inventory system that will cost $10

Question

1)  Easy Appliances Inc. is considering a new inventory system that will cost $100,000.  The system

is expected to generate positive cash flows over the next four years in the amounts of $25,000 in

year one, $35,000 in year two, $45,000 in year three, and $30,000 in year four.  Easy Appliances

required rate of return is 8%.  What is the payback period of this project?   

2.34 years    B)  2.89 years    C)  2.43 years    D)  3.27 years  

Using 1) above, what is the net present value of this project to the nearest ten dollars?     

A)  $21,870    B)  $10,930    C)  $89,070    D)  $  9,890  

  Using 1) above, what is the internal rate of return of this project?     

A)  12.60%    B)  8.91%    C)  10.93%    D)  11.78%  

Using 1) above, what is the modified internal rate of return of this project?     

A)  11.37%    B)  9.76%    C)  12.52%    D)  10.84%  

Explanation / Answer

Years Cash flows DCF PV               -   (100,000.00)             1.00 (100,000.00)          1.00      25,000.00             0.93      23,148.15          2.00      35,000.00             0.86      30,006.86          3.00      45,000.00             0.79      35,722.45          4.00      30,000.00             0.74      22,050.90 NPV      10,928.35 Payback period 3.27 years NPV 10,928.35 IRR 12.60% Please consider the time devoted to make this reply by rating this answer as 5star. Thank u in advance. God bless u :)

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