Please use the following information to answer the remaining problems : Able Cor
ID: 2630783 • Letter: P
Question
Please use the following information to answer the remaining problems:
Able Corporation has Project A with the following cash flows and a 6.7% cost of money: Numbers in parentheses are outflows. Both Year 0 and Year 3 cash flows are outflows.
Year
0
1
2
3
4
5
6
Cash flow
$(312,000)
$ 95,000
$120,000
$(280,000)
$ 230,000
$200,000
$180,000
2. Please calculate the profitability indexes (two decimals please)_________________
3.Please calculate the modified profitability index using the terminal value approach in the textbook (two decimals please)_______________________
4.Please calculate the internal rate of return (two decimals please)_____________________________
5. Please calculate the modified internal rate of return (two decimals please and per the book)________________________
6. Please calculate the payback period (two decimals please)________________________
7. Please calculate the present value payback period (two decimals please)______________________
8. You are opening your own business and estimate the following expenses and revenues:
Revenues year 1 $210,000 growing at 9% thereafter
Cost of goods sold year 1 $121,000 growing at 10% thereafter
Operating expense year 1 $47,000 growing at 6% thereafter
Taxes all in years 20% per year
Depreciation $15,000 in year 1, $21,000 in year 2, $17,000 in year 3
No working capital is needed -- please predict the after-tax cash flows from operations for the first three years of operations below:
Year 1_______________ Year 2__________________ and Year 3______________
Year
0
1
2
3
4
5
6
Cash flow
$(312,000)
$ 95,000
$120,000
$(280,000)
$ 230,000
$200,000
$180,000
Explanation / Answer
1. the net present value is $95981 postive
2.