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CORPORATE FINANCE INC. has a possible capital budgeting project with a cost of capital of...

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Finance

CORPORATE FINANCE INC. has a possible capital budgeting project with a cost of capital of 10%, and the expected cash flows shown below. (16 points)

Year

0

1

2

3

4

5

Cash Flow

-100

25

50

50

25

10

  1. Calculate the projects NPV. Should CORPORATE FINANCE INC. accept the project? Why?
  2. Calculate the projects IRR (approximate the IRR). Should CORPORATE FINANCE INC. accept the project according to the IRR rule? Why?
  3. Calculate the projects Profitability Index. Should CORPORATE FINANCE INC. accept the project according to the Profitability Index rule?
  4. Calculate the projects discounted payback period. What does payback tell you about the projects acceptability?

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