FINC 5000 week 8

FINC 5000
Homework Assignment for Week 8:
For Week 8, please turn in the answers to the following questions:
4. What is the payback period of the following project?
Initial Investment:
$50,000
Projected life:
8 years
Net cash flows each year: $10,000
6. What is the discounted payback period of the following
assuming your cost of capital is ? the rate is 7% project,
Initial Investment:
$50,000
Projected life:
8 years
Net cash flows each year: $10,000
8. Your firm is looking at a new investment opportunity, Project X, with net cash flows as
follows:
---- Net Cash Flows ---Project X
Initial Cost at T-0 (Now)
cash inflow at the end of year 1
cash inflow at the end of year 2
cash inflow at the end of year 3

($10,000)
6,000
4,000
2,000

Calculate project Alpha's Net Present Value (NPV), assuming your firm’s required rate of
return is 10%.
10. What is the Profitability Index of project X in question 8?
13. Calculate the IRR of the following project:
Year
0
1
2
3

Cash Flow
($30,000)
$10,000
$12,000
$14,000

14. Calculate the Modified Internal Rate of Return (MIRR) of the project in Question 13,
assuming your firm’s cost of capital is 10%.
End of assignment questions
(see answers to numerical problems below)
Answers to numerical problems:
Question 4: 5 years
Question 6: 7 years
Question 8: $263
Question 10: 1.026
Question 13: 9.2%
Question 14: 9.4%