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Take a Test - Mary Wright - Google Chrome Secure https://www.mathxl.c PlayerTest.aspx?testld 1869207718 centerwin yes FIN 311- Introduction to Finance Mary Wright 9/16/18 11:38 AM Quiz: Chapter 9 Quiz Submit Quiz This Question: 1 pt 6 of 6 This Quiz: 6 pts possible Comparing all methods. Risky Business is looking at a project with the following estimated cash flow: Initial investment at start of project: $12,100,000 Cash flow at end of year one: $2,057,000 Cash flow at end of years two through six: $2,420,000 each year Cash flow at end of years seven through nine: $2,468,400 each year Cash flow at end of year ten: $1,763,143 Risky Business wants to know the payback period NP RR MIRR, and P of this project. The appropriate discount rate for he pro e Risky Business will accept or reject the project under the five different decision models. s 8% lf the cu o period is six years for major projects. determine whether the management at What is the payback period for the new project at Risky Business? years (Round to two decimal places.) Under the payback period, this project would be What is the NPV for the project at Risky Business? (Select from the drop-down menu.) Round to the nearest cent.) Under the NPV rule, this project would be (Select from the drop-down menu.) What is the IRR for the new project at Risky Business? (Round to two decimal places.) Under the IRR rule, this project would be V. (Select from the drop-down menu.) What is the MIRR for the new project at Risky Business? (Round to two decimal places.) Enter your answer in each of the answer boxes. Save for Later 11:38 AM O Type here to search 9/16/2018

Explanation / Answer

a.

Payback = 5.15 years

b.

NPV = 3,576,635.99 (accept based on NPV)

PI = 1.30....accept

use IRR function in Excel

IRR = 14.17% ...........accept

use MIRR funciton in Excel

MIRR = 10.83%...........accept

Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow (12,100,000.000) 0                  (12,100,000.00)               (12,100,000.00)        2,057,000.000 1                       2,057,000.00               (10,043,000.00)        2,420,000.000 2                       2,420,000.00               (7,623,000.000)        2,420,000.000 3                       2,420,000.00                 (5,203,000.00)        2,420,000.000 4                       2,420,000.00                 (2,783,000.00)        2,420,000.000 5                       2,420,000.00                     (363,000.00)        2,420,000.000 6                       2,420,000.00                    2,057,000.00

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