a) Net present value

Qtr

Cash flow
DF @ 2.2% PV
0 (60,000,000.00)
1.0000 (60,000,000.00)
1-5
7,000,000.00
4.6862
32,803,561.77
6-8
8,000,000.00
2.5765
20,612,160.88
9-12
6,000,000.00
3.1839
19,103,166.82
12,518,889.48

b) Profitability Index (PI)

or

c) Payback period

Qtr

Cash flow
Cummulative
0 (60,000,000)
(60,000,000)
1
7,000,000
(53,000,000)
2
7,000,000
(46,000,000)
3
7,000,000
(39,000,000)
4
7,000,000
(32,000,000)
5
7,000,000
(25,000,000)
6
8,000,000
(17,000,000)
7
8,000,000
(9,000,000)
8
8,000,000
(1,000,000) 8 quaters
9
6,000,000
5,000,000
10
6,000,000
11,000,000
11
6,000,000
17,000,000
12
6,000,000
23,000,000

Payback period=

8 quaters +

0.1666666667 =

d) Equivalent annuity

12,518,889.48
10.4466

12,518,889.48

12,518,889.48
60,000,000.00

8.17 quaters

$1,198,369

+
60,000,000.00

0.21

60,000,000.00

1.21

a) Net present value

Effective rate

Year

[(1 + semi-annual rate)^2] - 1

0.1025 or

10.25%

Cash flow
DF @ 10%
PV
0 (215,000,000.00)
1.0000
(215,000,000.00)
1-7
55,000,000.00
4.8286
265,573,293.51
4
(60,000,000.00)
0.6768
(40,610,361.72)
7
35,000,000.00
0.5051
17,677,378.35
27,640,310.15

b) Profitability Index (PI)

or

d) Payback period

Qtr
0
1
2
3
4
5
6
7

Cash flow
Cummulative
(215,000,000)
(215,000,000)
55,000,000
(160,000,000)
55,000,000
(105,000,000)
55,000,000
(50,000,000)
(5,000,000)
(55,000,000)
55,000,000
- 5 years
55,000,000
55,000,000
90,000,000
145,000,000

Payback period =

5 years

c) Equivalent annuity

27,640,310.15
4.8286

27,640,310.15

27,640,310.15
215,000,000.00

$5,724,284

+
215,000,000.00

0.13

215,000,000.00

1.13

a) Net present value

Effective rate

Qtr

[(1 + semi-annual rate)^2] - 1

0.0419739481 or

Cash flow
DF @ 4.2%
PV
(11,000,000.00)
1.0000
(11,000,000.00)
(250,000.00)
3.6131
(903,268.00)
1,300,000.00
9.7428
12,665,595.26
20
2,000,000.00
0.4394
878,805.53
1,641,132.80
0

1-4
5-20

b) Profitability Index (PI)

or

c) Equivalent annuity

d) Internal rate of return

With Excel:
0 $
1 $
2 $

(11,000,000)
(250,000)
(250,000)

1,641,132.80
13.3558

3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

(250,000)
(250,000)
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
3,300,000

0
1
2
3
4
5
6
7
8
9
10

$
$
$
$
$
$
$
$
$
$
$

(11,000,000)
(250,000)
(250,000)
(250,000)
(250,000)
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000

IRR =
Manual calculations:
Step 1: trial and error
i=

5%
6%

11
12
13
14
15
16
17
18
19
20

5.34% > 4.2% (MARR) ==> accept

$
-$

Step 2: Interpolation
Proportion =

458,429.13
836,406.66

Answer

d) Modified internal rate of return

Per year
Reinvestment rat
Financing rate

Per quater
13%
15%

3.10%
3.56%

Qtr

Cash inflows
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Qtr
0
1
2
3
4

1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
3,300,000

Compunding perFuture value

15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0

2,055,831.50
1,993,966.72
1,933,963.59
1,875,766.10
1,819,319.91
1,764,572.31
1,711,472.20
1,659,970.00
1,610,017.62
1,561,568.42
1,514,577.17
1,469,000.00
1,424,794.35
1,381,918.96
1,340,333.78
3,300,000.00
28,417,072.63

Cash outflows
DF @ 15%
Present value
(11,000,000)
1.0000
(11,000,000)
(250,000)
0.9657
(241,416)
(250,000)
0.9325
(233,126)
(250,000)
0.9005
(225,121)
(250,000)
0.8696
(217,391)
(11,917,055)

4.44%

4.20%

1,641,132.80

1,641,132.80
11,000,000.00

$122,878

+
11,000,000.00

0.15

11,000,000.00

1.15

$
$
$
$
$
$
$
$
$
$

1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
1,300,000
3,300,000

Interpolation
-$ 458,429.13 =
-$ 1,294,835.79
5%

0.354
0.35%

5.35%

0.031

3.10%
1.03103
1.63047361
0.63047361
20.3208250971
26,417,072.63
2,000,000.00
28,417,072.63

a) Net present value

MARR

12.00%

Proposal 1
Year
0
1-12
12

Cash flow
DF @ 12%
PV
(5,000.00)
1.0000
(9,600.00)
6.1944
700.00
0.2567

(5,000.00)
(59,465.99)
179.67
(64,286.32)

Proposal 2
Year
0
1-6
6

Cash flow
DF @ 12%
PV
(1,800.00)
1.0000
(15,000.00)
4.1114
0.5066

(1,800.00)
(61,671.11)
(63,471.11)

b) Equivalent annuity
Proposal 1
=

(64,286.32)
6.1944

(63,471.11)
4.1114

Proposal 2

Conclusion: Proposal 1 should be chosen because it has a lower annual equivalent cost

-$10,378

-$15,438

Increase in rent
MARR
Commission on initial investment
Initial investment
Salvage value
Seller's commission

5%
1.25% per month
4%
650,000.00
1,000,000.00
3%

16.08%

a) Discounted payback period

Year
Rental income
Improvements
Property taxes
OCF
ICF
FCF
DF @16.08%
PV
Cummulative Present Value

Discounted PBP =

2 years +

(676,000.00)
(676,000.00)
1.0000
676,000.00
676,000.00 -

DPBP =

1
100,000.00
(25,000.00)
(7,500.00)
67,500.00

2
105,000.00
(30,000.00)
###
67,500.00

67,500.00
0.8615
58,151.83
617,848.17 -

67,500.00
0.7422
50,098.30
567,749.87

567,749.87
660,349.81

2 years 10 months

3
110,250.00
(40,000.00)
(7,500.00)
62,750.00
970,000.00
1,032,750.00
0.6394
660,349.81
92,599.94

12 months
or 2.86 years

b) Net present value

FCF
DF @16.08%
PV
NPV

c) Profitability Index (PI)

or

d) Internal rate of return

(676,000.00)
1.0000
676,000.00
92,599.94

67,500.00
0.8615
58,151.83

67,500.00
0.7422
50,098.30

1,032,750.00
0.6394
660,349.81

Year
FCF
DF @16.08%
PV
NPV
Year
FCF
DF @25%
PV
NPV

0
(676,000.00)
1.0000
676,000.00
92,599.94

1
67,500.00
0.8615
58,151.83

2
67,500.00
0.7422
50,098.30

3
1,032,750.00
0.6394
660,349.81

0
(676,000.00)
1.0000
676,000.00
50,032.00

1
67,500.00
0.8000
54,000.00

2
67,500.00
0.6400
43,200.00

3
1,032,750.00
0.5120
528,768.00

21.87%

e) Recommendation
The project should be accepted, considering each of the following capital budgeting techniques:
- Discounted payback period: The initial investment would be recovered within the period of the project, which means in 2.8
- Net present value: The net present value of positive, which means the initial outlay would be fully covered at the effective M
- Profitability index: The profitability index is greater than 1, meaning that excess cash flow would be left after paying the init
- Internal rate of return: The internal rate of return is higher than the MARR, which means that the project would meet the ex

10.31726

92,599.94

92,599.94
676,000.00

+
676,000.00

0.14

676,000.00

1.14

e project, which means in 2.86 years, though this is too close to the end of the project
ully covered at the effective MARR of 16.08%
uld be left after paying the initial investment
the project would meet the expectation of the shareholders of the company in increasing company wealth

MARR
Initial investment
Salvage value
Seller's commission

15.00%
100,000.00
120,000.00
12,500.00

a) Internal rate of return

Year
Rental income
OCF
ICF
FCF
DF @15%
PV
NPV

Year
FCF
DF @15%
PV
NPV

(100,000.00)
(100,000.00)
1.0000
100,000.00
11,820.46

0
(100,000.00)
1.00
(100,000.00)
11,820.46

5%
0
(100,000.00)
1.0000
(100,000.00)
29,477.55

Year
FCF
DF @5%
PV
NPV

12.14%

b) Modified internal rate of return

Per year
Reinvestment rate
Financing rate

15%
15%

1
9,500.00
9,500.00

2
10,000.00
10,000.00

3
10,500.00
10,500.00

9,500.00
0.8696
8,260.87

10,000.00
0.7561
7,561.44

10,500.00
0.6575
6,903.92

1
9,500.00
0.87
8,260.87

2
10,000.00
0.76
7,561.44

3
10,500.00
0.66
6,903.92

1
9,500.00
0.9524
9,047.62

2
10,000.00
0.9070
9,070.29

3
10,500.00
0.8638
9,070.29

Year
FCF
Compounding periods
Future value at reinvestment rate

Year
FCF
DF @ 15% financing rate
PV

1
9,500.00
4
16,615.56

2
10,000.00
3
15,208.75

3
10,500.00
2
13,886.25

0
(100,000.00)
1.0000
(100,000.00)

12.14%

e) Recommendation
The project should NOT be accepted, considering each of the following capital budgeting techniques:
- Net present value: The net present value at the MARR of 15% is negative, which means the initial outlay would not be fully
- Internal rate of return: The internal rate of return is lower than the MARR, which means that the project would not meet the
- Modified Internal rate of return (MIRR): The modified internal rate of return is lower than the MARR, which means that the

4
11,000.00
11,000.00
11,000.00
0.5718
6,289.29

5
11,500.00
11,500.00
107,500.00
119,000.00
0.4972
59,164.03

4
11,000.00
0.57
6,289.29

5
119,000.00
0.50
59,164.03

4
11,000.00
0.8227
9,049.73

5
119,000.00
0.7835
93,239.61

4
11,000.00
1
12,650.00

5
119,000.00
0
119,000.00

177,360.56

nitial outlay would not be fully recovered at the required cost of capital that the shareholders have set
he project would not meet the minimum required return of 15% of the shareholders of the company
MARR, which means that the project would not meet the minimum required return of 15% of the shareholders of the company

the company

MARR
Initial investment
Salvage value

15.00%
10,000.00
-

a) Internal rate of return

Year
Rental income
OCF
ICF
FCF
DF @15%
PV
NPV

1
10,000.00
10,000.00

(10,000.00)
(10,000.00)
1.0000
10,000.00
932.95

Year
FCF
DF @15%
PV
NPV

0
(10,000.00)
1.00
(10,000.00)
932.95

Year
FCF
DF @5%
PV
NPV

40%
0
(10,000.00)
1.0000
(10,000.00)
625.93

IRR 1
IRR 2

3
-

10,000.00
0.8696
8,695.65

0.7561
-

0.6575
-

1
10,000.00
0.87
8,695.65

2
0.76
-

3
0.66
-

1
10,000.00
0.7143
7,142.86

0.5102
-

0.3644
-

9.02%
0.00%

b) Modified internal rate of return

Per year
Reinvestment rate
Financing rate

Year
FCF
Compounding periods

20%
15%

1
10,000.00
4

2
-

3
-

Future value at reinvestment rate

Year
FCF
DF @ 15% financing rate
PV
Total PV

20,736.00

0
(10,000.00)
1.0000
(10,000.00)
(24,915.30)

17.89%

1
0.8696
-

0.7561
-

0.6575
-

4
30,000.00
30,000.00

5
(30,000.00)
(30,000.00)
30,000.00 (30,000.00)
0.5718
0.4972
17,152.60 - 14,915.30

4
30,000.00
0.57
17,152.60

5
(30,000.00)
0.50
(14,915.30)

4
30,000.00
0.2603
7,809.25

5
(30,000.00)
0.1859
(5,578.03)

4
30,000.00
1

5
0

36,000.00

4
0.5718
-

5
(30,000.00)
0.4972
(14,915.30)

56,736.00

MARR
Reinvestment rat
Financing rate

3.00% per quater

10.00%
10.00%

12.55% per year

Cabo San Tito

Year

CF
0
1
2
3
4
5
6
7
8
9
10

Year

Compoundi
Future value

45,000
45,000
45,000
45,000
45,000
45,000
45,000
65,000

CF
0
1
2
3
4
5
6
7
8
9
10

(140,000)
(10,000)
(10,000)

7
6
5
4
3
2
1
0

87,692.27
79,720.25
72,472.95
65,884.50
59,895.00
54,450.00
49,500.00
65,000.00
534,614.96

DF @ 10%PV
1.0000 - 140,000.00
0.9091 9,090.91
0.8264 8,264.46
(157,355.37)

13.01%

Bahia Trueno

Year

CF
0
1
2
3
4
5
6
7
8
9
10

Year

48,000
48,000
48,000
48,000
48,000
48,000
48,000
71,000

Compoundi
Future value

7
6
5
4
3
2
1
0

93,538.42
85,034.93
77,304.48
70,276.80
63,888.00
58,080.00
52,800.00
71,000.00
571,922.63

CF
DF @ 10%PV
0 (160,000) 1.0000 - 160,000.00
1 (12,000) 0.9091 - 10,909.09
2 (12,000) 0.8264 9,917.36
3
4
5
6
7
8
9
10
(180,826.45)

12.20%

a) Net present value

MARR

8.00%

Buy
Year
0
1-10
10

Cash flow
DF @ 12%
PV
(3,000,000.00)
1.0000
(3,000,000.00)
(60,000.00)
6.7101
(402,604.88)
5,000,000.00
0.4632
2,315,967.44
(1,086,637.44)

Rent
Year
0
1-10
10

Cash flow
DF @ 12%
PV
(150,000.00)
1.0000
(120,000.00)
6.7101
150,000.00
0.4632

(150,000.00)
(805,209.77)
69,479.02
(885,730.74)

b) Equivalent annuity
Buy
=

(1,086,637.44)
6.7101

(885,730.74)
6.7101

Rent

Conclusion: The company should rent because that option has a lower annual equivalent cost

-$161,941

-$132,000

MARR
Initial investment
Salvage value

7.30% semi-annually
1,250,000.00
1,000,000.00

15.13% per year

a) Net present value

Year
Savings
OCF
ICF
FCF
DF @15%
PV
NPV

2
320,000.00
320,000.00

3
320,000.00
320,000.00

320,000.00
0.7544
241,407.68

320,000.00
0.6552
209,677.41

1
0.87
-

2
320,000.00
0.75
241,407.68

3
320,000.00
0.66
209,677.41

1
0.8000
-

2
320,000.00
0.6400
204,800.00

3
320,000.00
0.5120
163,840.00

1
2
320,000.00
0.8686
0.7544
241,407.68
(1,250,000.00) (1,008,592.32)

3
320,000.00
0.6552
209,677.41
(798,914.90)

(1,250,000.00)
(1,250,000.00)
1.0000
1,250,000.00
35,697.10

0.8686
-

b) Internal rate of return

Year
FCF
DF @15%
PV
NPV

0
(1,250,000.00)
1.00
(1,250,000.00)
35,697.10

Year
FCF
DF @5%
PV
NPV

25%
0
(1,250,000.00)
1.0000
(1,250,000.00)
317,750.40

16.13%
c) Discounted payback period
Year
FCF
DF @15.13%
PV
Cummulative PV

0
(1,250,000.00)
1.0000
(1,250,000.00)
(1,250,000.00)

Discounted payback period =

4 years +

616,797.18
652,494.28

4
320,000.00
320,000.00

320,000.00
0.5691
182,117.72

###
320,000.00
1,000,000.00
1,320,000.00
0.4943
652,494.28

4
320,000.00
0.57
182,117.72

5
1,320,000.00
0.49
652,494.28

4
320,000.00
0.4096
131,072.00

5
1,320,000.00
0.3277
432,537.60

4
320,000.00
0.5691
182,117.72
(616,797.18)

5
1,320,000.00
0.4943
652,494.28
35,697.10

4.95 years

a) Net present value

Effective annual rat

Year
0
1-12
13-24
25-36
37-120
120

12.68% monthly rate =

[(1 + annual rate)^(1/12] - 1

Cash flow
DF @ 0.9998% PV
(27,000,000.00)
1.0000
(27,000,000.00)
50,000.00
11.2552
562,760.52
9.9886
100,000.00
8.8646
886,461.63
250,000.00
39.5983
9,899,586.72
19,000,000.00
0.3031
5,758,179.75
(9,893,011.38)

b) Profitability Index (PI)

or

c) Payback period
Compunding
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

$ (27,000,000)
$
(50,000) $
$
(50,000) $
$
(50,000) $
$
(50,000) $
$
(50,000) $
$
(50,000) $
$
(50,000) $
$
(50,000) $
$
(50,000) $
$
(50,000) $
$
(50,000) $
$
(50,000) $
$
$
$
$
$
$
$
$
$
$
$
$
$
$

(50,000)
(100,000)
(150,000)
(200,000)
(250,000)
(300,000)
(350,000)
(400,000)
(450,000)
(500,000)
(550,000)
(600,000)
(600,000)
(600,000)
(600,000)
(600,000)
(600,000)
(600,000)
(600,000)

FV of +ve CF

20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

(600,000)
(600,000)
(600,000)
(600,000)
(600,000)
(500,000)
(400,000)
(300,000)
(200,000)
(100,000)
100,000
200,000
300,000
400,000
500,000
600,000
850,000
1,100,000
1,350,000
1,600,000
1,850,000
2,100,000
2,350,000
2,600,000
2,850,000
3,100,000
3,350,000
3,600,000
3,850,000
4,100,000
4,350,000
4,600,000
4,850,000
5,100,000
5,350,000
5,600,000
5,850,000
6,100,000
6,350,000
6,600,000
6,850,000
7,100,000
7,350,000
7,600,000
7,850,000
8,100,000
8,350,000
8,600,000
8,850,000
9,100,000
9,350,000
9,600,000
9,850,000
10,100,000
10,350,000
10,600,000

95
94
93
92
91
90
89
88
87
86
85
84
83
82
81
80
79
78
77
76
75
74
73
72
71
70
69
68
67
66
65
64
63
62
61
60
59
58
57
56
55
54
53
52
51
50
49
48
47
46
45
44

257,308.50
254,761.36
252,239.44
249,742.48
247,270.24
244,822.48
242,398.94
239,999.40
237,623.60
235,271.33
232,942.34
230,636.41
570,883.26
565,232.00
559,636.67
554,096.74
548,611.65
543,180.86
537,803.83
532,480.02
527,208.92
521,989.99
516,822.73
511,706.62
506,641.16
501,625.84
496,660.17
491,743.65
486,875.80
482,056.14
477,284.19
472,559.48
467,881.54
463,249.91
458,664.12
454,123.73
449,628.29
445,177.35
440,770.47
436,407.21
432,087.15
427,809.85
423,574.89
419,381.86
415,230.33
411,119.90
407,050.16
403,020.71
399,031.14
395,081.07
391,170.10
387,297.85

77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
Payback period

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
19,250,000

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

10,850,000
11,100,000
11,350,000
11,600,000
11,850,000
12,100,000
12,350,000
12,600,000
12,850,000
13,100,000
13,350,000
13,600,000
13,850,000
14,100,000
14,350,000
14,600,000
14,850,000
15,100,000
15,350,000
15,600,000
15,850,000
16,100,000
16,350,000
16,600,000
16,850,000
17,100,000
17,350,000
17,600,000
17,850,000
18,100,000
18,350,000
18,600,000
18,850,000
19,100,000
19,350,000
19,600,000
19,850,000
20,100,000
20,350,000
20,600,000
20,850,000
21,100,000
21,350,000
40,600,000

Two possible answers:

(i) "Mechanical way":
between 119 and 120
119 months
120 months
??? Months
Proportion

Answer = 119 +
(ii) "Common sense way":

43
42
41
40
39
38
37
36
35
34
33
32
31
30
29
28
27
26
25
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0

383,463.92
379,667.95
375,909.56
372,188.37
368,504.02
364,856.14
361,244.38
357,668.36
354,127.74
350,622.18
347,151.31
343,714.81
340,312.32
336,943.52
333,608.06
330,305.62
327,035.87
323,798.49
320,593.16
317,419.56
314,277.37
311,166.29
308,086.01
305,036.22
302,016.62
299,026.91
296,066.79
293,135.98
290,234.18
287,361.11
284,516.47
281,700.00
278,911.41
276,150.42
273,416.76
270,710.17
268,030.36
265,377.09
262,750.08
260,149.08
257,573.82
255,024.06
252,499.53
19,250,000.00
54,590,226.00

$ 21,350,000
$ 40,600,000
$ 27,000,000
$ 5,650,000
$ 19,250,000

0.2935

0.2935 x 1 month =

With the normal (operating) cash flows you will not recover the initial investment,
not even when you include all 120 cash flows: $ 21,600,000
Only when we include the SV ($19 mln) we can reach the $27 million.
Since this Salvage Value takes place per definition at the end of the project,
and is not equally divided over the period as the operating cash flow is,
the investment is recovered exactly at the end of month

d) Discounted payback period

Does not exist, because NPV is negative

e) Modified internal rate of return

0.5711%

b) Equivalent annuity
Proposal 1
=

(9,893,011.38)
69.7068

0.0099981304 or

PV of -ve CF
(27,000,000.00)
(49,505.04)
(49,014.98)
(48,529.78)
(48,049.37)
(47,573.72)
(47,102.78)
(46,636.51)
(46,174.84)
(45,717.75)
(45,265.19)
(44,817.10)
(44,373.45)

0.9998%

(9,893,011.38)

(9,893,011.38)
27,000,000.00

+
27,000,000.00

0.37

27,000,000.00

0.63

(27,562,760.52)

119.29

ver the initial investment,

< $27 million
e $27 million.
e end of the project,
ting cash flow is,
120

-$141,923