A company is considering a project(Project A)that produces the following cash flows. Assume that the cash flow
Question:
A company is considering a project (Project A) that produces the following cash flows. Assume that the cash flow is complete at the end of each year. The company's cost of capital is 7%.
Project A
year 0 = -390,000,000 ISK
year 1 = ISK 190,000,000
year 2 = ISK 30,000,000
year 3 = ISK 90,000,000
year 4 = ISK 80,000,000
year 5 = ISK 120,000,000
year 6 = 260,000,000 ISK
a) Calculate the payback period of the project
b) Calculate the discounted payback period of the project.
c) Calculate the present value (NPV) of the project
d) Calculate the project's internal rate of return (IRR).
e) Calculate the improved internal rate of return (MIRR) of the project and assume that the company grows the cash flow at a 6% interest rate.
f) Calculate the EAA (equivalent annual annuity) of the project.
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston