Chaquille's K-House, Inc. made an investment in a project with an initial cost of $11,205,051. This investment was for 8 years and had no residual value. The company expects to receive yearly net cash inflows of $2,611,900. Management is requiring a return of 12% on the investment.
Chaquille's K-House, Inc. made an investment in a project with an initial cost of $11,205,051. This investment was for 8 years and had no residual value. The company expects to receive yearly net cash inflows of $2,611,900. Management is requiring a return of 12% on the investment.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Chaquille's K-House, Inc. made an investment in a project with an initial cost of $11,205,051. This investment was for 8 years and had no residual value. The company expects to receive yearly net
(Round your answers to two decimal places when needed and use rounded answers for all future calculations).
Transcribed Image Text:1. What is the IRR for the project? Is this a good investment?
Inital Investment / Annual Net Cash Flow = Annuity PV Factor
Present value factor of an annuity of $1
1 − (1 + r)
r
Annuity Factor
Rate Periods Annuity Factor
12% 8
14% 8
16% 8
=
17% 8
n
I
Initial Investment
NPV of the Project
where r
=
=
rate, and n
=
2. Use the rate closest to the calculated Annuity PV factor that creates a positive NPV.
3. Is this an attractive investment? Select an answer
# of periods.
Chaquille's K-House, Inc. Net Cash Inflow Annuity PV Factor Present Value
PV of annuity
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