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You are a financial analyst for the Waffle Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects A and B. Each project has a cost of $50,000, and the cost of capital for each is 10%.
The projects’ expected net cash flows are as follows:
Expected Net Cash Flows
Year
Project A
Project B
0
($50,000)
($50,000)
1
25,000
15,000
2
20,000
15,000
3
10,000
15,000
4
5,000
15,000
5
5,000
15,000
- Calculate each project’s payback period, net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI).
You are a financial analyst for the Waffle Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects A and B. Each project has a cost of $50,000, and the cost of capital for each is 10%.
The projects’ expected net cash flows are as follows:
|
Expected Net Cash Flows |
|
Year |
Project A |
Project B |
0 |
($50,000) |
($50,000) |
1 |
25,000 |
15,000 |
2 |
20,000 |
15,000 |
3 |
10,000 |
15,000 |
4 |
5,000 |
15,000 |
5 |
5,000 |
15,000 |
- Calculate each project’s payback period, net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI).
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2 Jun 2021