Question

Aaron Manufacturing Inc. intends to invest $70,000 in a modernization capital project that will generate the following cash inflows during eight years:
Year___________________________
1 ...........$12,000
2 ........... 17,000
3 ........... 18,000
4 ........... 23,000
5 ........... 15,000
6 ........... 11,000
7 ........... 9,000
8 ........... 8,000
1. Calculate the NPV at 12% and 18%.
2. Calculate the internal rate of return of the capital project.
3. If the annual cash flow were an even $15,000 per year for eight years, what would be the NPV at 12% and 18%?
4. What level of annual cash flow would be required to obtain a 20% IRR?
5. How would the results of (1) and (2) change if there was a capital recovery of $40,000 at the end of year 8?



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  • CreatedDecember 03, 2014
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