NET PRESENT VALUE: THE CYCLONE GOLF RESORTS IS REDOING ITS GOLF COURSE AT A COST OF \$2,744,320. IT EXPECTS TO GENERATE CASH FLOWS OF \$1, 223,445, \$2,007,812, AND \$3,147,890 OVER THE NEXT THREE YEARS. IF THE APPROPRIATE DISCOUNT RATE FOR THE FIRM IS 13 PER

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Net present value: The Cyclone Golf Resorts is redoing its golf course at a cost of \$2,744,320. It expects to generate cash flows of \$1, 223,445, \$2,007,812, and \$3,147,890 over the next three years. If the appropriate discount rate for the firm is 13 percent, what is the NPV of this project?

Payback: Elmer Sporting Goods is getting ready to produce a new line of gold clubs by investing \$1.85 million. The investment will result in additional cash flows of \$525,000, \$812,500, and 1,200,000 over the next three years. What is the payback period for this project?

Internal rate of return: Quick Sale Real Estate Company is planning to invest in a new development. The cost of the project will be \$23 million and is expected to generate cash flows of \$14,000,000, \$11,750,000, and \$6,350,000 over the next three years. The company’s cost of capital is 20 percent. What is the internal rate of return on this project? (Round to the nearest percent.)

 Problem 10.42

An investment of \$98 generates after-tax cash flows of \$37 in Year 1, \$86 in Year 2, and \$121 in Year 3. The required rate of return is 20 percent. The net present value is closest to

Given the following cash flows for a capital project, calculate the NPV and IRR. The required rate of return is 8 percent.

 Year 0 1 2 3 4 5 Cash Flows \$-46904 \$11330 \$11675 \$23308 \$8899 \$4232

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