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.
At IRR, present value of cash inflows - Present value of cash outflows = 0
Computation of present value of cash inflows =
[$3,500 * PVAF (12.3% , 10)] + [$11,000 * {PVAF (12.3% , 20 periods) - PVAF (12.3% , 10 periods)} ]
= $38,781.54
So, present value of cash outflows = $38,781.54
Computation of NPV (WACC = 8%)
So, Net present value = $18,892.47
A project has annual cash flows of $3,500 for the next 10 years and then $11,000...
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