An investment has expected cash flows of -$200, $100, $220, $90 and $45 at the e

Question

An investment has expected cash flows of -$200, $100, $220, $90 and $45 at the end of years 0 through 4, respectively. The required return is 8.5%. Using interpolation, estimate the payback period for this investment.

2.45 years

2.0 years

1.2 years

1.45 years

An investment has expected cash flows of -$200, $100, $220, $90 and $45 at the end of years 0 through 4, respectively. The required return is 8.5%. Determine the investment's Net Present Value.

$181.98

$196.14

$211.22

$174.92

a.

2.45 years

b.

2.0 years

c.

1.2 years

d.

1.45 years

Explanation / Answer

1. Payback = 1.45 years

2. NPV = $181.98

Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Cash flow -200 100 220 90 45 Discount rate % 9% present value of cashflows -200 92.2 186.9 70.5 32.5 NPV 182 IRR 38.25% Cumulative Cash Flow -200.00 -100.00 120.00 210.00 255.00 Dicounted cumulative cash flows -200.00 -107.83 79.05 149.51 181.98 Profitability Index = PV of future cashflows/initial investment 1.91 Paybac period 1.45 years

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