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Able Corporation has a project with the following cash flows and an 7
Able Corporation has a project with the following cash flows and an 7.4% cost of money: Numbers in parentheses are outflows. Both Year 0 and Year 3 cash flows are outflows.
Year Cash flow
0 $(251,000)
1 $ 95,000
2 $168,000
3 $(300,000)
4 $ 280,000
5 $280,000
6 $244,000
1. Please calculate the net present value
2. Please calculate the profitability indexes (two decimals please)
3. Please calculate the modified profitability index using the terminal value approach (two decimals
please)
4. Please calculate the internal rate of return (two decimals please)
5. Please calculate the modified internal rate of return (two decimals please )
6. Please calculate the payback period (two decimals please)
7. Please calculate the present value payback period (two decimals please)
Expert Solution
1) Net Present Value is $306,318
2) Profitability Indexes is 2.22
3) Modified Profitability Index is 1.62
4) Internal Rate of Return is 31.28% or 31%
5) Modified Internal Rate of Return is 16.41% or 16%
6) Payback period is 4.03 years
7) Present value payback period is 4.25 years
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