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Cox Healthcare Clinic is evaluating a Capital Budgeting project that costs $52,125 and has expected net...

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Finance

Cox Healthcare Clinic is evaluating a Capital Budgeting projectthat costs $52,125 and has expected net cash flows of $12,000 peryear for eight years. The first inflows occur one year after thecost outflow and the project has a cost of capital of 12percent.

Below is a table of cash flows for the Capital Budgetproject:

YearAnnual CashFlowCumulative CashFlow
0-$52,125-$52,125
1$12,000-$40,125
2$12,000-$28,125
3$12,000-$16,125
4$12,000-$4,125
5$12,000$7,875
6$12,000$19,875
7$12,000$31,875
8$12,000$43,875

QUESTIONS: Answer andRespond to the Following. Pleaseshow your work.

  1. What is the project's payback?
  2. What is the project's NPV?
  3. What is the IRR?
  4. Is the project financially acceptable? Explain youranswer.

Answer & Explanation Solved by verified expert
4.2 Ratings (796 Votes)
Project Year Cash flow stream Cumulative cash flow 0 52125 52125 1 12000 40125 2 12000 28125 3 12000 16125 4 12000 4125 5 12000 7875 6 12000 19875 7 12000 31875 8 12000 43875 Payback period is the time by which undiscounted cashflow cover the intial investment outlay this is happening between year 4    See Answer
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