Financial Planning and Forecasting
Insigne Corporation is considering two investment projects (projects A and project B) that are mutually exclusive. Project A requires an initial cash out flow of $10,000,000 today and Project B requires an initial cash out flow of $15,000,000 today. The expected end-of-year cash inflows of each project are given in the following table:
| Year | Cash Inflow project A | Cash Inflow project B |
| 1 | 3,500,000 | 7,500,000 |
| 2 | 6,000,000 | 8,000,000 |
| 3 | 6,000,000 | 4,000,000 |
| 4 | 9,000,000 | 4,500,000 |
Weighted average cost of capital is 13% for both projects.
- What is the IRR of each project?
- What is the NPV of each project?
- What is MIRR of each project?
- What is payback of each project?
Which project should Insigne Corporation take? Please explain why
A factory cost $330,000. You forecast that it will produce cash inflows of $105,000 in year 1, $165,000 in year 2, and $270,000 in year 3. The discount rate is 11%.
What is the value of the factory?
Solution:
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