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6A4) Find the Discounted Payback period for the following project

Finance Nov 30, 2020

6A4) Find the Discounted Payback period for the following project. The discount rate is 8% 
                                  Project X

Initial Outlay             $17,001

Year 1                       $5,585

Year 2                       $5,991

Year 3                       $5,589

Year 4                       $8,844 
Round the answer to two decimal places. 

6B4) A project has an initial outlay of $3,455. It has a single payoff at the end of year 5 of $8,619. What is the net present value (NPV) of the project if the company's cost of capital is 12.66 percent?

Round the answer to two decimal places.

 

6C4) Find the modified internal rate of return (MIRR) for the following series of future cash flows if the company is able to reinvest cash flows received from the project at an annual rate of 12.09 percent.The initial outlay is $428,900.

Year 1: $135,100

Year 2: $188,000

Year 3: $184,500

Year 4: $120,900

Year 5: $184,100

Round the answer to two decimal places in percentage form. 

 

6D4) A project has an initial outlay of $1,249. It has a single payoff at the end of year 9 of $8,002. What is the profitability index (PI) of the project, if the company's cost of capital is 5.90 percent?

Round the answer to two decimal places.

 

6F3) ?Paul Sharp is CFO of Fast Rocket Inc. He tries to determine the cost of equity financing for his company. The stock has a beta of 0.80. Paul estimated that the market return is 9.06%. The current rate for 10-year Treasury Bonds is 2.37%. Calculate cost of common equity financing using CAPM - SML formula.

Round the answers to two decimal places in percentage form.

Expert Solution

6A4) Discounted payback period = 3.35 years

6B4) Net present value (NPV) = $1,294.07

6C4) Modified internal rate of return (MIRR) = 19.14%

6D4) Profitability index (PI) = 3.82

6F4) Computation of the cost of common equity:-

Cost of common equity = Risk free rate + Beta * (Market return - Risk free rate)

= 2.37% + 0.80 * (9.06% - 2.37%)

= 2.37% + (0.80 * 6.69%)

= 2.37% + 5.35%

= 7.72%

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