Answer:
a. $40,001.70
b. 30.19 %
c. 18,01%
.
d. 2 years and 7 months
e. 3 years
Explanation:
Calculation of NPV using a financial calculator :
-$50,000 CFj
$19,000 CFj
$20,000 CFj
$18,000 CFj
$19,000 CFj
$20,000 CFj
$17,000 CFj
i/yr 7%
Shift NPV $40,001.70
Calculation of IRR using a financial calculator :
-$50,000 CFj
$19,000 CFj
$20,000 CFj
$18,000 CFj
$19,000 CFj
$20,000 CFj
$17,000 CFj
Shift IRR 30.19 %
Calculation of MIIR :
<em>The First Step is to Calculate the Terminal Value at end of year 6.
</em>
Terminal Value (FV) = Sum of (PV x (1 + r) ^ 6 - n)
=$19,000 x (1.07) ^ 5 + $20,000 x (1.07) ^ 4 + $18,000 x (1.07) ^ 3 + $19,000 x (1.07) ^ 2 + $20,000 x (1.07) ^ 1 + $17,000 x (1.07) ^ 0
= $26,648.48 + $26,215.92 + $22,050.77 + $21,753.10 + $21,400 + $17,000
= $135,068.27
<em>The Next Step is to Calculate the MIRR using a Financial Calculator :
</em>
-$50,000 CFj
0 CFj
0 CFj
0 CFj
0 CFj
0 CFj
$135,068.27 CFj
Shift IRR/Yr 18,01%
Therefore, the MIRR is 18,01%
.
Calculation of the Payback Period :
$50,000 = Year 1 ($19,000) + Year 2 ($20,000) + $11,000 / $18,000
= 2 years and 7 months
Calculation of the project's Discounted Payback :
$50,000 = $19,000 / (1.07)^1 + $20,000 / (1.07)^2 + $18,000/ (1.07)^3 + $19,000/ (1.07)^4
= Year 1 ($17,757.01) + Year 2 ($17,468.77) + Year 3 ($14,693.36) + $80.83 / $14,495
= 3 years
