Please help with Finance assignemnt.Microsoft Word - ASSINGMENT 5 - Business Finance...

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Please help with Finance assignemnt.Microsoft Word - ASSINGMENT 5 - Business Finance FIN2221-ASSIGNMENT 5  1. What is the payback period for the set of cash flows given below? Year Cash Flow  0 $ - 6,400  1  1,600  2  1,900  3  2,300  4  1,400  2. An investment project has annual cash inflows of $4,200, $5,300, 6,100 and $7,400 and a discount rate of 14 percent.  What is the discounted payback period for these cash flows if the initial cost is $7,000?  What is the discounted payback period for these cash flows if the initial cost is $10,000?  What is the discounted payback period for these cash flows if the initial cost is $13,000? Do not round intermediate calculations and round your final answer to 2 decimal places. 3. You are trying to determine whether to expand your business by building a new manufacturing plane.  The plant has an installation cost of $15 million, which will be depreciated straight-line to zero over its four-year life.  If the plant has projected net income of $1,938,200, $2,201,600, $1,876,000 and $1,329,500 over these four years, what is the project’s average accounting return (AAR)?  Round your answer to 2 decimal places. 4. A frim evaluates all of its projects by applying the IRR rule.  A project under consideration has the following cash flows: Year Cash Flow  0 $ -34,000  1  16,000  2  18,000  3  15,000  If the required return is 16 percent, what is the IRR for this project?  Should the firm accept the  project?  Explain.  Round your answer to 2 decimal places. 5. A frim evaluates all of its projects by applying the NPV rule.  A project under consideration has  the following cash flows:    Year Cash Flow  0 $ -34,000  1      16,000  2      18,000  3      15,000    If the required return is 12 percent, what is the NPV for this project?  Should the firm accept the  project?  Explain. What is the NPV for this project if the required return is 35 percent? Should  the firm accept the project? Explain.  Round your answer to 2 decimal places.

Akshay Kumar · Accepted Answer

Answer 1
Cumulative Cash Inflows 
	Year
	Cash Flow 
	Cumulative Cash Flow
	1
	$1,600
	$1,600
	2
	$1,900
	$3,500
	3
	$2,300
	$5,800
	4
	$1,400
	$7,200
Till Year 3, total Cash Inflows are $5,800. Cost is $6,400. Additional cash flows required $600 ($6,400 - $5,800). 
Thus, Payback Period is = 3 years + ($600/$1,400)
                                           = 3.43 years
Payback Period is3.43 years
Answer 2
Cumulative Discounted Cash Flows
	Year
	Cash Flow
	Discounting 
Factor @14%
	Discounted 
Cash Flows
	Cumulative Discounted 
Cash Flow
	1
	          4,200 
	0.88
	3,684.21
	3,684.21
	2
	          5,300 
	0.77
	4,078.18
	7,762.39
	3
	          6,100 
	0.67
	4,117.33
	11,879.71
	4
	          7,400 
	0.59
	4,381.39
	16,261.11
 
If Initial Cost is $7,000:
In Year 1, Discounted Cash Inflows are $3,684.21. Additional cash flows required $3,315.79 ($7,000 - $3,684.21). 
Thus, Discounted Payback Period is = 1 year + ($3,315.79/$4,078.18)
                                           = 1.81 years
Thus, Discounted Payback Period is 1.81 years
If Initial Cost is $10,000:
Till Year 2, Discounted Cash Inflows are $7,762.39. Additional cash flows required $2,237.61 ($10,000 - $7,762.39). 
Thus, Discounted Payback Period = 2 years + ($2,237.61/$4,117.33)
                                           = 2.54 years
Discounted Payback Period is 2.54 years
If Initial Cost is $13,000:
Till Year 3, Discounted Cash Inflows are $11,879.71.

Microsoft Word - ASSINGMENT 5 - Business Finance FIN2221-ASSIGNMENT 5 1. What is the payback period for the set of cash flows given below? Year Cash Flow 0 $ - 6,400 1 1,600 2 1,900 3 2,300 4 1,400 2....

Answer To: Microsoft Word - ASSINGMENT 5 - Business Finance FIN2221-ASSIGNMENT 5 1. What is the payback period...

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