Practice HW Proj Decis Rules Problems - FIN 300 Project...

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FIN 300 – Project Rules (Ch. 10) Practice HW Problems 1.You have a project with the following cash-flow timeline: At t=0 You invest $100M in the project (cash-flow = -$100M) t=1yr Cash flow = +$50M t=2yrs Cash flow = +$50M t=3yrs Cash flow = +$50M Other investment opportunities – with the same risk – produce a 25% annual return. What is the payback period? What is the discounted payback period? What is the NPV (net present value)? What is the IRR (internal rate of return)? – You may use a financial calculator or Excel. Alternatively, you could try a couple of trial and error iterations. Think back to when you tried to find a YTM for bonds – same idea! I would not ask this type of problem on

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