Project K costs $54,093.64, its expected cash inflows are $13,000 per year for 8
ID: 2800673 • Letter: P
Question
Project K costs $54,093.64, its expected cash inflows are $13,000 per year for 8 years, and its WACC is 9%. What is the project's IRR? Round your answer to two decimal places.
Project K costs $75,000, its expected cash inflows are $12,000 per year for 7 years, and its WACC is 13%. What is the project's payback? Round your answer to two decimal places.
Project K costs $25,000, its expected cash inflows are $5,000 per year for 8 years, and its WACC is 11%. What is the project's discounted payback? Round your answer to two decimal places.
Explanation / Answer
1) IRR can be calculated using I/Y function on a calculator
N = 8, PMT = 13,000, PV = -54,093.64, FV = 0 => Compute I/Y = 17.35%
2) Payback Period = Cost / Cash Inflows = 75,000 / 12,000 = 6.25 years
3) Discounted Payback is calculated using discounted cash flows. DCF = CF / (1 + r)^n
Discounted payback = 7 + (25000 - 4504 - 4058... - 2169) / 2,169.63 = 7.66
Year CF DCF 1 5000 $4,504.50 2 5000 $4,058.11 3 5000 $3,655.96 4 5000 $3,293.65 5 5000 $2,967.26 6 5000 $2,673.20 7 5000 $2,408.29 8 5000 $2,169.63Related Questions
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