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4. Determine the IRR on the following projects:

a) An initial outlay of $10,000 resulting in a free cash flow of $2,146 at the end of each year for the next 10 years. (2 points)

b) An initial outlay of $15,000 resulting in a free cash flow of $3,500 at the end of each year for the next 5 years. (2 points)

c) An initial outlay of $10,000 resulting in a free cash flow of $1,960 at the end of each year for the next 20 years.

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Patrina Schowalter
Patrina SchowalterLv2
28 Sep 2019
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You are considering a project with an initial cash outlay of $80,000 and expected free cash flow of $21,600 at the end of each year for 6 years. the required rate of return for this project is 10.8 percent. a. what is the project's payback period? b. what is the project's NPV? c. what is the project's PI? what is the project's IRR?

  1. (Payback, NPV, PI, and IRR calcuations) You are considering a project with an initial cash outlay of 80000 and expecte free cash flows of 20000 at the end of each year for 6 years. The required rate of return for this project is 10 percent /
  1. What is the project

You have a choice between two mutually exclusive investments. Project A requires initial cash outlay of $150,000 and has projected cash flows of $100,000 for year one, $55,000 for year two, and $30,000 for year three. Meanwhile, Project B requires initial cash outlay of $100,000 and has projected cash flows of $40,000 per year for the next three years. The required rate of return is 10%.

(a)(3 points) Calculate the ordinary payback period for both projects and determine which should be accepted. Assume the target payback period is 2 years. Explain why.

(b) (4 points) Calculate the discounted payback period for both projects and determine which should be accepted. Assume the target payback period is 2 years Explain why.

(c) (3 points) Calculate the profitability index (PI) for both projects and determine which should be accepted. Explain why.

(d) (4 points) Assuming the projected cash flow is a future net income, calculate the average accounting return (AAR) for both projects and determine which should be accepted if the target average accounting return is 30%. Explain why.

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