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The following spread sheet shows an evaluation of project B. All cash flows occur at the end if the relevant year, apart from the initial investment which occurs immediately.
A
B
C
D
E
F
G
Description
Year Cashflow ($)
-30,000 12,000 12,000 7,000 7,000 6,000
Cumulative cashflow ($)
-30,000 -18,000 -6,000 1,000 8,000 14,000
Present value factor at 10% per year
1 0.909 0.826 0.751 0.683 0.621
Present value at 10% per year ($)
-30,000 10,908 9,912 5,257 4,781 3,726 4,584
Cumulative Present value at 10% per year ($)
-30,000 -19,092 -9,180 -3,923 858 4,584
1 2 3 4 5
6 Initial Investment 1
7 Operating cashflow 1
8 Operating cashflow 2
9 Operating cashflow 3
10 Operating cashflow 4
11 Operating cashflow 5
12 Net present value 4584(a) What is the discounted payback period of project B (to the nearest whole number)?……………….years
(b) What is the internal rate of return (IRR) of the project (to the nearest whole number) ……..%
Task 3
If project
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