FIN571 – Using the Payback Method, IRR, and NPV
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Purpose of Assignment
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Order Paper NowThe purpose of this assignment is to allow the student to calculate the project cash flow using net present value (NPV), internal rate of return (IRR), and the payback methods.
Assignment Steps
Resources: Corporate Finance
Create a 350-word memo to management including the following:
- Describe the use of internal rate of return (IRR), net present value (NPV), and the payback method in evaluating project cash flows.
- Describe the advantages and disadvantages of each method.
Calculate the following time value of money problems:
- If you want to accumulate $500,000 in 20 years, how much do you need to deposit today that pays an interest rate of 15%?
- What is the future value if you plan to invest $200,000 for 5 years and the interest rate is 5%?
- What is the interest rate for an initial investment of $100,000 to grow to $300,000 in 10 years?
- If your company purchases an annuity that will pay $50,000/year for 10 years at a 11% discount rate, what is the value of the annuity on the purchase date if the first annuity payment is made on the date of purchase?
- What is the rate of return required to accumulate $400,000 if you invest $10,000 per year for 20 years. Assume all payments are made at the end of the period.
Calculate the project cash flow generated for Project A and Project B using the NPV method.
- Which project would you select, and why?
- Which project would you select under the payback method? The discount rate is 10% for both projects.
- Use Microsoft® Excel® to prepare your answer.
- Note that a similar problem is in the textbook in Section 5.1.
Sample Template for Project A and Project B:
Show all work.
Submit the memo and all calcluations.
Note: two files to submit are required — one MS Word File and one MS Excel spreadsheet
**Cannot accept more than 5% plagiarism, it will be submitted to TurnItIn. If you are referencing please do in-text citations.
***Please use grading guide attached to help you and make sure that all requirements are met.
Written Paper Assignments:
It should not have to be restated, but remember that ALL written paper assignments are required to have references AND citations in the body of the paper. A paper with no references or citations is considered a form of plagiarism and will result in zero points.
Please note the discussions are NOT like a paper — it is considered a public type of forum. Most items from the web site and the text are considered copyrighted information and it is an infringement to copy and paste without express written permission by the author. This includes items copied that are even referenced and cited. I will not count these items as substantive. Please feel free to include the URL address in your discussion posts so we can go to the site, but keep your discussion comments ONLY in your own words. Thanks for your attention to this matter.
***It is VERY IMPORTANT that you follow the grading guide as well as the APA format. This professor is very picky and must be done carefully and correctly.
BOOK: Ross, S., Westerfield, R., Jaffe, J. & Jordan, B. (2016). Corporate finance (11th edition). New York, N.Y. McGraw-Hill Education.
Feel free to use more than one reference.
Let me know if you have any questions.
