A project that provides annual cash flows of $13,000 for 8 years costs $69,354 today. ...

Question

Question

A project that provides annual cash flows of $13,000 for 8 years costs $69,354 today.

a. If the required return is 15 percent, what is the NPV for this project?

b. Determine the IRR for this project.

Answer 1

Answer #1

a.

Calculating PV of Cash Inflow,

PV = [FV = 0, PMT = 13,000, N = 8, I = 0.15]

PV = $58,335.18

NPV = 58,335.18 - 69,354

NPV = -$11,018.82

b.

Calculating IRR,

Using TVM Calculation,

I = [PV = 69,354, PMT = 13,000, FV = 0, N = 8]

I = 10.00%

Answer 2

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