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Capital Budgeting and Financial Analysis Techniques: A Comprehensive Study

A comprehensive study of capital budgeting and financial analysis techniques.

Chloe Martinez
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Capital Budgeting and Financial Analysis Techniques: A ComprehensiveStudyProblem Set 4In all problems, show your work and label your answers.1.Time012345Project A−3,0001,0001,2001,400200200Assume that this company has a 10%cost of capital. Then compute:a. Paybackb. Discounted or Present Value Paybackc. NPVd. IRRAnswer:•Payback Period: 2.57 years•Discounted Payback Period: 3.35 years•NPV: 213.50•IRR: 15.2%2.Time01234Cash Flow220−200−200−200400The investment has two IRRs. The first is at7% and the second is approximately 34%.Draw the NPV profile of this investment and describe the cost of capital that would make thisinvestment acceptable.Answer:

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