Agape Mining Inc. is evaluating a project with the following cash flows: Year
Question:
Agape Mining Inc. is evaluating a project with the following cash flows:
Year Cashflow
0 -$380,000,000.00
1 $79,000,000.00
2 $82,000,000.00
3 -$53,000,000.00
4 $175,000,000.00
5 $195,000,000.00
6 -$40,000,000.00
7 $188,000,000.00
8 $71,000,000.00
- Construct a spreadsheet and calculate the following (the required rate of return is 11%):
o Payback period
o Discounted payback period
o Internal rate of return (IRR)
o Modified IRR
▪ The discounting approach
▪ The reinvestment approach
▪ The combination approach
o Net present value (NPV)
- Based on your analysis, should the company take the project? Why?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill