3. Van Heusen Ltd. is considering a project that has the following cash flows. The WACC or cost of capital is 10%. Year 0 1 2 3 4 Cash Flow $1,000 (initial cash outflow) 400 (cash inflow at end of year 1) 300 (cash inflow at end of year 2) 500 (cash inflow at end of year 3) 400 (cash inflow at end of year 4) a) Find the NPV (net present value). (4 points) b) Find the discounted payback period. (3 points) c) Find the profitability index. (2 pooints) d) Set up the equation for the IRR. You need not find the numerical value of the IRR. (3 points) e) State the accept/reject rule for the IRR. (1 point) |