You purchase machinery for $20,000 that generates after-tax cash flows of $7,500 annually for the next...

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You purchase machinery for $20,000 that generates after-tax cash flows of $7,500 annually for the next 4 years. The cost of c

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Answer 1

Answer #1


Project
IRR is the rate at which NPV =0
IRR	0.184504885
Year	0	1	2	3	4
Cash flow stream	-20000	7500	7500	7500	7500
Discounting factor	1	1.184505	1.403052	1.661922	1.9685544
Discounted cash flows project	-20000	6331.759	5345.49	4512.848	3809.9023
NPV = Sum of discounted cash flows
NPV Project =	1.37225E-06
Where
Discounting factor =	(1 + IRR)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

IRR=	18.5%

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Answer 2

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