A firm is planning a new project that is estimated to yield cash flows of -$58 million per year in Year 1 through Year 5, $89 million per year in Years 6 through 9, and $120 million in Years 10 through 12, and $135 million in Years 13 through 18. This investment will cost the company $268 million today (initial outlay). We assume that the firm's cost of capital is 8.5%. 

(1)  Draw a time line to show the cash flows of the project.

(2)  Compute payback period, net present value (NPV), profitability index (PI), internal rate of return (IRR), and modified internal rate of return (MIRR).

(3)  Discuss whether the project should be taken or not.

Answer rating: 100% (QA)

1 The time line representing the cash flows of the project would look like this Year 0 268 million initial outlay Year 15 58 million per year Year 69 ... View the full answer