The writer is very fast, professional and responded to the review request fast also. Thank you.
Question:
The Drillago Co. is involved in searching for locations in which to drill for oil. The firm’s current project requires an initial investment of $15 million and has an estimated life of 10 years. the expected future cash inflows for the project are as shown.
Year 1 Cash inflows $600,000
year 2 cash inflows 1,000,000
year 3 cash inflows 1,000,000
year 4 cash inflows 2,000,000
year 5 cash inflows 3,000,000
year 6 cash inflows 3,500,000
year 7 cash inflows 4,000,000
year 8 cash inflows 6,000,000
year 9 cash inflows 8,000,000
year 10 cash inflows 12,000,000
The firm’s current cost of capital is 13%.
TO DO:
Create a spreadsheet to answer the following:
A.Calculate the project’s internal rate of return (NPV). Is the project acceptable under the IRR technique? Explain.
B.Calculate the project’s internal rate of return (IRR). Is the project acceptable under the IRR technique? Explain.
C. In this case, did the two methods produce the same results? Generally, is there a preference between the NPV and IRR techniques? Explain.
d. Calculate the payback period for the project. If the firm usually accepts projects that have payback periods between 1 and 7 years, is this project acceptable?
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more