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Anton [14]
3 years ago
13

Winston Clinic is evaluating a project that costs $52, 125 and has expected net cash inflows of $12,000 per year for eight years

. The first inflow occurs one year after the cost outflow, and the project has a cost of capital of 12 percent. What is the project's payback? What is the project's NPV? Its IRR? Its MIRR? Is the project financially acceptable? Explain your answer.
Business
1 answer:
kvv77 [185]3 years ago
5 0

Answer:

Payback period (years):  4.23  years

NPV: $6,685  

IRR: 16%

MIRR: 14%

The project is financially acceptable because IRR and MIRR is greater than cost of capital

Explanation:

Payback period is calculating the number of year when cash inflow can cover cash outflow (regardless the present value of cash inflow).

As we can easily estimate, cash inflow in 5 year can cover the investment.

Then payback period = 4 years + 12000/52,125 = 4.23 years

We can use excel to calculate NPV, IRR, MIRR in the formula as below

Net present value of project: NPV=(discounting rate, cash outflow, cash inflow) = (12%, -52125,12000,12000......,12000) = $6,685

Internal rate of return: IRR= (cash outflow, cash inflow) = ( -52125,12000,12000,......,12000) = 16%

Modified internal rate of return: MIRR = (cash outflow, cash inflow, IRR, cost of capital) = (-52125,12000,12000......,12000,16%,12%) = 14%

<em>Please see attachment for more details.</em>

Download xlsx
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Answer:

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Bob got a 30 year Fully Amortizing FRM for $1,500,000 at 4%, except with non-constant payments. For the first 2 years Bob will p
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Future Value of mortgage determines the future value of a mortgage after payments have been made, at a regular frequency, charged a regular rate of interest, compounded at payment dates.

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