Van Auken Inc. is considering a project that has the following cash flows:?

Question

Van Auken Inc. is considering a project that has the following cash flows:

Year

Cash Flow

0

-$1,000

1

400

2

300

3

500

4

400

The company¡¯s WACC is 10%. What are the project¡¯s payback, internal rate of return, net present value, and PI?

Answer 1

Payback period = 3.08 years.

IRR = 21.22%

NPV = $260.43

PI = profitability index = 1+ (npv / investment) = 1.26