Capital Budgeting: Net Present Value & Internal Rate of Return
Consider a project with the following expected cash flows:
Year Cash flow
0 – $400,000
1 $100,000
2 $120,000
3 $850,000
If the discount rate is 0%, what is the project’s net present value?
If the discount rate is 2%, what is the project’s net present value?
If the discount rate is 6%, what is the project’s net present value?
If the discount rate is 11%, what is the project’s net present value?
What is this project’s modified internal rate of return?
Consider a project with the expected cash flows:
Year Cash flow
0 -$815,000
1 $141,000
2 $320,000
3 $440,000
What is this project’s internal rate of return?
If the discount rate is 1%, what is this project’s net present value?
If the discount rate is 4%, what is this project’s net present value?
If the discount rate is 10%, what is this project’s net present value?
If the discount rate is 18%, what is this project’s net present value?
A project requiring a $4.2 million investment has a profitability index of 0.94. What is its net present value?