Homework Answers
rate positively ..
| i | ii | iii=i*ii | |||||
| year | Cash flow | PVIF @ 10% | Present value | ||||
| 0 | -11000 | 1.0000 | (11,000.00) | ||||
| 1 | 4000 | 0.9091 | 3,636.36 | ||||
| 2 | 4000 | 0.8264 | 3,305.79 | ||||
| 3 | 4000 | 0.7513 | 3,005.26 | ||||
| 4 | 4000 | 0.6830 | 2,732.05 | ||||
| 5 | 4000 | 0.6209 | 2,483.69 | ||||
| 4,163.15 | |||||||
| ans a) NPV = | 4,163.15 | ||||||
| Since, NPV is positive threfore project should be accepted | |||||||
| Ansb) | IRR is the rate which is max rate at which project is still acceptable | ||||||
| using excel formula of IRR | |||||||
| IRR = | 23.92% | ||||||
| Max required rate = | 23.92% |
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