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Homework answers / question archive / As corporate manager for acquisitions, your group is assessing a project that is expected to produce cash flows of $750 at the end of year 1
As corporate manager for acquisitions, your group is assessing a project that is expected to produce cash flows of $750 at the end of year 1. $1,000 at the end of year 2, $850 at the end of year 3, and $1,300 at the end of Year 4. If the firm requires a minimum IRR or "hurdle rate" of 10% for these types of investments, what is most you should pay for this project? Your answer should be between 2738.00 and 4355.00, rounded to 2 decimal places, with no special characters.
Ans 3034.80
| Year | Project Cash Flows (i) | DF@ 10% | DF@ 10% (ii) | PV of Project ( (i) * (ii) ) |
| 0 | 0 | 1 | 1 | - |
| 1 | 750 | 1/((1+10%)^1) | 0.909091 | 681.82 |
| 2 | 1000 | 1/((1+10%)^2) | 0.826446 | 826.45 |
| 3 | 850 | 1/((1+10%)^3) | 0.751315 | 638.62 |
| 4 | 1300 | 1/((1+10%)^4) | 0.683013 | 887.92 |
| PV | 3,034.80 |
