I need help with these finance concepts. If you can answer with each step, that would be great! Thank you in advance for your time. Assume the required return is 15 percent.Year Cash Flows0 - $100,0001 $20,0002 $30,0003 $40,0004 $40,0005 $60,0001. What is the net present value (NPV) of the above cash flows? 2. What is the payback period of this project? 3. What is the discounted payback period? 4. What is the internal rate of return (IRR)? 5. What is the profitability index?6. Provide a numerical example to explain why the net present value (NPV) and discounted payback period may give opposing conclusions about whether you should accept or reject a project. Similar to the setup for questions 1 – 5, your answer should provide a series of cash flows with calculations for the NPV and discounted payback period. Briefly explain your example in 1 – 2 sentences. Suppose you are considering opening an electronics retail store, which specializes in printers. Given market research, you think you can sell 20,000 printers in the first year at a price of $60 per printer. Sales are expected to grow by 10% each year following the first year. It costs roughly $48 per printer to make them, and projects such as this typically have a 5-year life. You require a 17 percent return on this product. Fixed costs for the project will run $90,000 per year. Further, you will need to invest a total of $600,000 in manufacturing equipment. Assume that this $600,000 will be 100 percent depreciable over the 5-year life of the project. Finally, the project will require an initial investment of $115,000 in net working capital. The applicable tax rate is 34 percent.Use the tax shield approach to calculate operating cash flows.Pro Forma Income Statement Year 1 2 3 4 5 Sales Variable Costs Gross Profit Fixed Costs Depreciation EBIT Taxes (34%) Net Income Pro Forma Cash Flow Statement Year 0 1 2 3 4 5 Operating Cash Flows Change in Net Working Capital Net Capital Spending Cash Flow from Assets 7. What is the internal rate of return (IRR) of this project? 8. What is the net present value (NPV) of this project? Suppose you’re given the following information about a project’s cash flows. Year Cash Flows0 - $100,0001 X2 2X + 5,0003 3X + 10,0004 4X9. The project has a net present value (NPV) of $31,750 and a required return of 12.5 percent. What is the cash flow in year 3? A consumer electronics store is considering an expansion of its operations in a new city. The company’s financial managers have estimated the following cash flows in relation to the project. Assume the required return is 10%.Year Cash Flow0 - $500,0001 $125,0002 $150,0003 $185,0004 ?10. Assuming this project recoups its initial investment in exactly 3.56 years (on a discounted basis), what is the missing cash flow in year 4?
This question was answered on: May 23, 2022
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