1. What is the payback period on Popeye's purchase of a new pleasure boat for his tourist business? The expected cash flows appear below. (note: payback is in years; round to 2 decimals)
Year 0 cash flow = -8,600,000
Year 1 cash flow = 4,100,000
Year 2 cash flow = 3,800,000
Year 3 cash flow = 3,200,000
Year 4 cash flow = 4,000,000
Year 5 cash flow = 2,200,000
Year 6 cash flow = 3,900,000
2. A colleague asks for your help in finding the discount rate where the NPV=0 for a set of cash flows. You quickly recall that this is the IRR for a project. Answer in %, rounding to 2 decimals.
Year 0 cash flow = -116,000
Year 1 cash flow = 40,000
Year 2 cash flow = 32,000
Year 3 cash flow = 45,000
Year 4 cash flow = 39,000