Question

A project has the following cash flows: Year Cash Flow $73,500 -55,000 - 27,200 a. What is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the NPV of this project if the required return is 4 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the NPV of the project if the required return is O percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is the NPV of the project if the required return is 23 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Internal rate of return b. NPV < Prey 4 of 25 Next >

Answer 1

a. Internal rate of return is calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= -$23,500. It is entered with a negative sign since it is a cash outflow.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the IRR and CPT button to get the IRR of the project.

The IRR of project is 8.83%.

b. Net present value can be calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= $73,500. Indicate the initial cash flow by a negative sign since it is a cash outflow.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the required return of 4%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value is -$4,532.54.

c. Net present value can be calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= $73,500. Indicate the initial cash flow by a negative sign since it is a cash outflow.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the required return of 0%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value is -$8,700.

d. Net present value can be calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= $73,500. Indicate the initial cash flow by a negative sign since it is a cash outflow.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the required return of 23%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value is $10,805.84.

In case of any query, kindly comment on the solution.