Question

A project has the following cash flows:    Year Cash Flow 0 $64,200        1 –30,200...

A project has the following cash flows:

  

Year Cash Flow
0 $64,200       
1 –30,200       
2 –48,200      

   

Required:
(a) What is the IRR for this project?
(Click to select)13.97%12.77%13.3%13.03%13.57%

   

(b) What is the NPV of this project, if the required return is 11 percent?
(Click to select)$-2,169.96$-2,042.31$2,127.41$-2,127.41$-2,233.78

   

(c) NPV at 0 percent?
(Click to select)$-14,910.00$-14,200.00$-14,484.00$14,200.00$-13,632.00

   

(d) NPV at 22 percent?
(Click to select)$7,203.38$-7,062.13$6,779.65$7,062.13$7,415.24
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Answer #1

a)

IRR is the rate of return that makes NPV equal to 0

NPV = 64,200 + -30,200 / ( 1 + R)1 + -48,200 / ( 1 + R)2

Using trial and error method, let's try R as 13.03%

NPV = 64,200 + -30,200 / ( 1 + 0.1303)1 + -48,200 / ( 1 + 0.1303)2

NPV = 0

Therefore IRR is 13.03%

b)

NPV = 64,200 + -30,200 / ( 1 + 0.11)1 + -48,200 / ( 1 + 0.11)2

NPV = $-2,127.41

c)

NPV = 64,200 + -30,200 / ( 1 + 0)1 + -48,200 / ( 1 + 0)2

NPV = $-14,200.00

d)

NPV = 64,200 + -30,200 / ( 1 + 0.22)1 + -48,200 / ( 1 + 0.22)2

NPV = $7,062.13

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