If there is a way to do this on a financial calculator, please show how to do th
ID: 2826832 • Letter: I
Question
If there is a way to do this on a financial calculator, please show how to do that! Thanks!
Part A)
You have the following information on a project's cash flows. The cost of capital is 11.2%
Year
Cash flows
0
-$118,000
1
23,000
2
23,000
3
37,000
4
32,000
5
51,000
The NPV of the project is $____. Round to two decimal places.
Your Answer:
Part B)
You have the following information on a project's cash flows.
Year
Cash flows
0
-$115,000
1
24,000
2
31,000
3
30,000
4
59,000
5
55,000
The project's payback is ____ years. Round it to two decimal places.
Your Answer:
Year
Cash flows
0
-$118,000
1
23,000
2
23,000
3
37,000
4
32,000
5
51,000
Explanation / Answer
Answer to Part A:
Using financial calculator:
I/Y = 11.2%
CF0 = -118000
CF1 = 23000
CF2 = 23000
CF3 = 37000
CF4 = 32000
CF5 = 51000
PV = -848.98
So, NPV of the project is -$848.98
Answer to Part B:
Initial Outflow = $115,000
Cost recovered in 3 years = $85,000 ($24,000 + $31,000 + $30,000)
Remaining Cost to be recovered = $30,000 ($115,000 - $85,000)
Payback Period = 3 + $30,000/$59,000
Payback Period = 3.51
The project’s payback is 3.51 years.