Computation of Present Value of Future cash Inflow | |||
Year | Net Cash Flow | PVF | Amount |
Year0 | -$1,220,000.00 | 1 | -$1,220,000.00 |
Year 1 | $395,000.00 | 0.909 | $359,090.91 |
Year 2 | $460,000.00 | 0.826 | $380,165.29 |
Year 3 | $355,000.00 | 0.751 | $266,716.75 |
Year 4 | $310,000.00 | 0.683 | $211,734.17 |
NPV | -$2,292.88 |
b. Computation of IRR |
At IRR Present value of cash inflows = Initial investment |
Annuaity Factor= 1520000/1220000=1.246 |
Annuity factor 1.2456 for 4 years will be 9.91% |
Hence IRR will be 9.91% |
or Use Excel Function= IRR( Sum of All cash Flow) |
9.91% |
14 Problem 7-23 NPV and IRR Anderson International Limited is evaluating a project in Erewhon The...
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