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1) Garrett Inc WACC is 10% Garrett inc is considering a project that will cost the company $1M....

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Accounting

1)Garrett Inc WACC is 10%

Garrett inc is considering a project that will cost thecompany $1M. the project will provide after tax cash flows for thenext 5 years :
Y1: $0
Y2: $400,000
Y3: $500,000
Y4: $300,000
Y5: $200,000

A) what is the IRR for Garrett’s project?

B) what is the payback for the Garrett project?


2) what is the terminal value of the following asset:
cost: $1,000,000
accumulated depreciation: $750,000
projected scrap value: $300,000
company tax rate: 40%

Answer & Explanation Solved by verified expert
4.3 Ratings (815 Votes)

Year CashFlow PV Factor PV of cashflow Cumulative Cashflow
0 $ -1,000,000 1 $ -1,000,000
1 $                -   0.909090909 $                -   $               -  
2 $      400,000 0.826446281 $     330,579 $    330,579
3 $      500,000 0.751314801 $     375,657 $    706,236
4 $      300,000 0.683013455 $     204,904 $    911,140
5 $      200,000 0.620921323 $     124,184 $ 1,035,324
IRR 1.12%
Payback 4.72
Year CashFlow PV Factor PV of cashflow Cumulative Cashflow
0 -1000000 =1/(1+10%)^B3 =C3*D3
1 0 =1/(1+10%)^B4 =C4*D4 =E4
2 400000 =1/(1+10%)^B5 =C5*D5 =F4+E5
3 500000 =1/(1+10%)^B6 =C6*D6 =F5+E6
4 300000 =1/(1+10%)^B7 =C7*D7 =F6+E7
5 200000 =1/(1+10%)^B8 =C8*D8 =F7+E8
IRR =IRR(E3:E8)
Payback =4+(1000000-911140)/124184

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