FIN200 3 - 3. What is the Internal Rate of Return (IRR) for...

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Your company is considering an investment in producing a new product. The initial cost is $500,000 and the project will take in $135,000 for five years. Cost of capital is 10% 1. What is the Net Present Value (NPV) of the project? 135,000 (3.791)=511,785 inflows + (-500,000 outflow at time 0)= $11,785 With calculator= $11,756.21 2. What is the Profitability Index (PI) of the project? 511,785/500,000= 1.0235 Calculator = 511,756.21/500,000= 1.0235
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Unformatted text preview: 3. What is the Internal Rate of Return (IRR) for the project? 500,000= 135,000 (PVIFA 5,?%) PVIFA=3.703 about 11% calculator 10.916% Buying vs. leasing: 1.Identify cash flows under purchase option 2. Identify cash flows under lease option 3. Computer Present value of purchase: Compute PV of the loan used to buy and find monthly pmt. PV = PMT(PVIFAyrs,%). PV = amount of loan. 4.Compute present value of lease...
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