The project is expected to cost $10,000 today and expected to provide the same amount of...

Question

Question

The project is expected to cost $10,000 today and expected to provide the same amount of cash inflows of $Z for the next four years. Assuming the cost of capital is 10% and its IRR is 12%, what is the NPV of this project?

$436,27

-$2075.35

$3,154.71

-$419.04

None of the above

Answer 1

Answer #1

At IRR,

Present value of cash inflows - Present value of cash outflows = 0

= $Z * PVAF(12% , 4 years) - $10,000 = 0

= ($z * 3.037349) - $10,000 = 0

$Z = $3,292.34

Net present value at cost of capital 10% is

$3,292.34 * PVAF(10% , 4 years) - $10,000 = $436.27

NPV =$436.27

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Answer 2

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