A project has annual cash flows of $6,500 for the next 10 years and then $11,000 each year for the following 10 years. The IRR of this 20-year project is 13.41%. If the firm's WACC is 12%, what is the project's NPV?
Step-1:Calculation of cost of project | ||||||||
IRR is the rate at which present value of cash inflows is equal to its cost. | ||||||||
Present value of annuity of 1 for 10 years | = | (1-(1+i)^-n)/i | Where, | |||||
= | (1-(1+0.1341)^-10)/0.1341 | i | = | 13.41% | ||||
= | 5.33847887 | n | = | 10 | ||||
Present value of 1 | = | (1+i)^-n | ||||||
= | (1+0.1341)^-10 | |||||||
= | 0.28410998 | |||||||
Present value of cash flows of first 10 years | = | $ 6,500.00 | * | 5.338479 | = | $ 34,700.11 | ||
Present value of cash flows of next 10 years | = | $ 11,000.00 | * | 5.338479 | * | 0.28411 | = | $ 16,683.87 |
Present value of cash flows of next 20 years | $ 51,383.98 | |||||||
So, cost of project is | $ 51,383.98 | |||||||
Step-2:Calculation of present value of project's cash inflows at WACC that is discounted rate | ||||||||
Present value of annuity of 1 for 10 years | = | (1-(1+i)^-n)/i | Where, | |||||
= | (1-(1+0.12)^-10)/0.12 | i | = | 12.00% | ||||
= | 5.65022303 | n | = | 10 | ||||
Present value of 1 | = | (1+i)^-n | ||||||
= | (1+0.12)^-10 | |||||||
= | 0.32197324 | |||||||
Present value of cash flows of first 10 years | = | $ 6,500.00 | * | 5.650223 | = | $ 36,726.45 | ||
Present value of cash flows of next 10 years | = | $ 11,000.00 | * | 5.650223 | * | 0.321973 | = | $ 20,011.43 |
Present value of cash flows of next 20 years | $ 56,737.88 | |||||||
Step-3:Calculation of project's NPV | ||||||||
Present value of cash inflow | $ 56,737.88 | |||||||
Less cost of project | $ 51,383.98 | |||||||
Project's NPV | $ 5,353.90 |
A project has annual cash flows of $6,500 for the next 10 years and then $11,000...
A project has annual cash flows of $6,500 for the next 10 years and then $6,000 each year for the following 10 years. The IRR of this 20-year project is 12.04%. If the firm's WACC is 8%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent
A project has annual cash flows of $8,000 for the next 10 years and then $6,500 each year for the following 10 years. The IRR of this 20-year project is 11.56%. If the firm's WACC is 8%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.
A project has annual cash flows of $6,500 for the next 10 years and then $9,000 each year for the following 10 years. The IRR of this 20-year project is 13.12%. If the firm's WACC is 8%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.
A project has annual cash flows of $6,500 for the next 10 years and then $5,000 each year for the following 10 years. The IRR of this 20-year project is 9.2%. If the firm's WACC is 8%, what is the project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
A project has annual cash flows of $3,000 for the next 10 years and then $11,000 each year for the following 10 years. The IRR of this 20-year project is 12.04%. If the firm's WACC is 10%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.
A project has annual cash flows of $3,500 for the next 10 years and then $11,000 each year for the following 10 years. The IRR of this 20-year project is 12.3%. If the firm's WACC is 8%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.
A project has annual cash flows of $8,000 for the next 10 years and then $11,000 each year for the following 10 years. The IRR of this 20-year project is 10.33%. If the firm's WACC is 9%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.
A project has annual cash flows of $6,500 for the next 10 years and then $7,000 each year for the following 10 years. The IRR of this 20-year project is 12.38%. If the firm's WACC is 8%, what is the project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. Please show all work when using a financial calculator
A project has annual cash flows of $5,000 for the next 10 years and then $10,500 each year for the following 10 years. The IRR of this 20-year project is 13.66%. If the firm's WACC is 12%, what is the project's NPV? Round your answer to the nearest cent.
A project has annual cash flows of $7,000 for the next 10 years and then $8,500 each year for the following 10 years. The IRR of this 20-year project is 12.17%. If the firm's WACC is 12%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.