Question

Please remember to round your answer to two decimal places.

Problem 10-03 MIRR

A project has an initial cost of $43,425, expected net cash inflows of $12,000 per year for 10 years, and a cost of capital of 8%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.______%

Problem 10-04 Profitability Index

A project has an initial cost of $61,000, expected net cash inflows of $12,000 per year for 11 years, and a cost of capital of 9%. What is the project's PI? Do not round your intermediate calculations. Round your answer to two decimal places. ________

Problem 10-05 Payback

A project has an initial cost of $59,050, expected net cash inflows of $13,000 per year for 8 years, and a cost of capital of 13%. What is the project's payback period? Round your answer to two decimal places._______ years

Problem 10-06 Discounted Payback

A project has an initial cost of $60,000, expected net cash inflows of $14,000 per year for 7 years, and a cost of capital of 13%. What is the project's discounted payback period? Round your answer to two decimal places.________ years

Please remember to round your answer to two decimal places.

Answer 1

Answer 10-03:

Workings:

Answer 10-04:

Initial cash outflow = $61,000,

Expected net cash inflows per year for 11 years = $12,000

PV Factor for a One-Dollar Annuity Discounted at 9% for 11 Periods = [1 - 1 / (1 + k) ⁿ] / k

= (1 - 1/ (1+9%) ¹¹) / 9% = 6.805191

PV of annual cash flows = $12,000 * 6.805191 = $81,662.29

PI = PV of annual cash flows / Initial cash outflow = $81,662.29 / $61,000 = 1.3387 = 1.34

Profitability Index 1.34

Answer 10-05:

Since project's annual cash flows are uniform:

Project's payback period = Initial cost / Annual cash flow

= $59,050 / $13,000 = 4.5423 = 4.54 years

Answer 10-06:

Workings: