06 Aug FINANCE 3000 Ch 11
- Consider the following: Project “K” Costs $52,125, it’s expected cash flows are $12,000 per year for 8 years and it’s WACC is 12%.
- What is the NPV for Project K?
- What is the IRR for Project K?
- What is the Payback Period for Project K?
- What is the Discounted Payback Period for Project K?
- Your division is considering two projects with the following cash flows:
| Year | 0 | 1 | 2 | 3 |
| Project A
Project B |
−$25
−$20 |
$5
$10 |
$10
$9 |
$17
$6 |
- What are the projects NPV’s assuming WACCS of 5? 10%? 15%?
- What are the Projects IRR? Does it change if you change the WACC? Explain why or why not.
- A firm with a WACC of 10% is considering the following mutually exclusive projects. Which project would you recommend and why?
| Year | 0 | 1 | 2 | 3 | 4 | 5 |
| Project A
Project B 9.43% |
−$400
−$600 |
$55
$300 |
$55
$300 |
$55
$50 |
$225
$50 |
$225
$49 |
Chapter 11 Page 396
Questions: (NOT Problems)
11-3
11-5
11-8
11-9
Problems: Page 398
11-17
11-20
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