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Calculate NPV, IRR and Payback period for questions 1-5.

1. The project has the following cash flows and the appropriate discount rate is 15 percent?

NPV -$2,687.98

IRP

Payback Period 2.24 Years

2. What is the net present value of a project that has an initial cost of $42,700 and produces cash inflows of $9,250 a year for 9 years if the discount rate is 14.65 percent? What is the IRR of the project

NPV $1,992.43

IRP

Payback Period

3. Corner Restaurant is considering a project with an initial cost of $211,600. The project will not produce any cash flows for the first three years. Starting in Year 4, the project will produce cash inflows of $151,000 a year for three years. This project is risky, so the firm has assigned it a discount rate of 18.6 percent.

NPV -$16,670.67

IRP

Payback Period

4. Professional Properties is considering remodeling the office building it leases to Heartland Insurance. The remodeling costs are estimated at $2.8 million. If the building is remodeled, Heartland Insurance has agreed to pay an additional $820,000 a year in rent for the next five years. The discount rate is 12.5 percent.

NPV $5,719,666.04

IRP

Payback Period

5. A proposed project requires an initial cash outlay of $49,000 for equipment and an additional cash outlay of $18,700 in Year 1 to cover operating costs. During Years 2 through 4, the project will generate cash inflows of $42,500 a year. The discount rate is 11.6 percent?

NPV

IRP

Payback Period

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