Continuing with the analysis of the company Comercializa S.A. de C.V., the expected cash flows must be
Question:
Continuing with the analysis of the company Comercializa S.A. de C.V., the expected cash flows must be analyzed in order to understand how viable the project is in the different years, the data are as follows:
Useful Life | Total Initial Investment | Expected cash flows |
Years | ||
0 | 350,000 | |
1 | 39,000 | |
2 | 34,000 | |
3 | 41,000 | |
4 | 32,000 | |
5 | 33,000 | |
6 | 29,000 |
- Calculate the IRR for the following project periods:
1 year | |
2 years | |
3 years | |
4 years | |
5 years |
- Calculate the net present value with the following discount rates:
10% | |
15% | |
18% | |
20% |
1.- Considering a Cost of capital of 25%, in how many years would the project be acceptable? 2.- Compare the IRR between 3 and 5 years, what would you prefer, a project that lasts 3 years or a 5-year project, considering that the risk is the same? 3.- Make your conclusions, according to all the results obtained.
Auditing A Business Risk Approach
ISBN: 978-0538476232
8th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg