Chapter 11
Solutions to EndofChapter Problems
111
Financial calculator solution: Input CF
0
= 52125, CF
18
= 12000, I/YR = 12, and
then solve for NPV = $7,486.68.
112
Financial calculator solution: Input CF
0
= 52125, CF
18
= 12000, and then solve
for IRR = 16%.
113
MIRR: PV costs = $52,125.
FV inflows:
PV
FV
0
1
2
3
4
5
6
7
8









12,000
12,000
12,000
12,000
12,000
12,000
12,000
12,000
13,440
15,053
16,859
18,882
21,148
23,686
26,528
52,125
MIRR = 13.89%
147,596
Financial calculator solution: Obtain the FVA by inputting N = 8, I/YR = 12, PV =
0, PMT = 12000, and then solve for FV = $147,596. The MIRR can be obtained
by inputting N = 8, PV = 52125, PMT = 0, FV = 147596, and then solving for
I/YR = 13.89%.
114
Since the cash flows are a constant $12,000, calculate the payback period as:
$52,125/$12,000 = 4.3438, so the payback is about 4 years.
115
Project K’s discounted payback period is calculated as follows:
Annual
Discounted @12%
Period
Cash Flows
Cash Flows
Cumulative
0
($52,125)
($52,125.00)
($52,125.00)
1
12,000
10,714.29
(41,410.71)
2
12,000
9,566.33
(31,844.38)
3
12,000
8,541.36
(23,303.02)
4
12,000
7,626.22
(15,676.80)
5
12,000
6,809.12
(8,867.68)
6
12,000
6,079.57
(2,788.11)
7
12,000
5,428.19
2,640.08
8
12,000
4,846.60
7,486.68
The discounted payback period is 6 +
19
.
8
$5,42
11
$2,788.
years, or 6.51 years.
12%
×
1.12
×
(1.12)
2
×
(1.12)
3
×
(1.12)
4
×
(1.12)
5
×
(1.12)
6
×
(1.12)
7