FIN 571 NERD Education Specialist /fin571nerd.com FIN 571 NERD Education Specialist /fin571nerd.com | Page 43

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: 1. 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%? 2. What is the future value if you plan to invest $200,000 for 5
years and the interest rate is 5%? 3. What is the interest rate for an
initial investment of $100,000 to grow to $300,000 in 10 years? 4. 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? 5. 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
calculations
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