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Net Present Value and Discounted Payback Period Using the amount of capital expenditures incurred in 2018 -1976.4...

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Finance

Net Present Value and Discounted Payback Period

Using the amount of capital expenditures incurred in 2018-1976.4 (which will consider to be an initial investment outflow),assume the company will generate operating cash inflows of $205million the first year, $385 million the second year, $478 millionthe third year, $599 million the fourth year, $625 million thefifth year, and $100 million the year six.

a.) What is the NPV using the company’s WACC of 3.56 and what isthe IRR?

b.) Did the company make a good investment decision using theNPV criteria?

c.) If the company had a discounted payback period policy offour years, did it make a sound investment decision (use thecompany’s calculated WACC)?

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