DISCUSSION QUESTION 3-2
MF620: Financial Statement Development and Analysis

Lesson 3: Assessing Future Financial Needs


Upon completion of the Required Readings, write a thorough, well-planned narrative answer to the following discussion question. Rely on your Required Readings and the Lecture and Research Update for specific information to answer the discussion question, but turn to your original thoughts when asked to apply, evaluate, analyze, or synthesize the information. Your Discussion Question response should be both grammatically and mechanically correct, and formatted in the same fashion as the question itself. If there is a Part A, your response should identify a Part A, etc. In addition, you must appropriately cite all resources used in your responses and document in a bibliography using APA style.

Discussion Question 2 (50 points)
Calculate the following:

1. What is the payback period of a project with average annual cash outflows of $8,000, average annual cash inflows of $10,000, and an initial investment of $13,000?

2. What is the net present value of a simple one-period project with an initial investment of $12,000 and an expected net cash flow in one year of $15,000, assuming a discount rate of 8 percent?

3. What is the net present value of a project with a $40,000 initial investment and expected net cash flows of $15,000, $20,000, and $25,000 in each of the next three years, assuming an appropriate discount rate of 10 percent?

a. What is the internal rate of return for the project?

b. What is the profitability index for the project?

c. What is the payback period for the project?

d. What is the modified internal rate of return for the project if the finance rate is 10 percent and the reinvestment rate is 13 percent?

ANSWER WILL BE SENT ON EMAIL.