Question

A project that provides annual cash flows of $13,900 for 12 years costs $90,244 today.

  

a. If the required return is 8 percent, what is the NPV for this project?

  

b. Determine the IRR for this project.

Answer 1

B222 - X V fc A B C 206 Year Cash flows PVIF@8% 207 A B 208 0$ (90,244)| 1.0000 $ 209 1 $ 13,900 0.9259 $ 210 2 $ 13,900 0.8573 $ 211 3 $ 13,900 0.7938 $ 212 4 $ 13,900 0.7350 $ 213 5 $ 13,900 0.6806 $ 214 6 $ 13,900 0.6302 $ 7 $ 13,900 0.5835 $ 216 8 $ 13,900 0.5403 $ 2179 $ 13,900 0.5002 $ 218 10 $ 13,900 0.4632 $ 11 $ 13,900 0.4289 $ 220 12 $ 13,900 0.3971 $ =IRR(B208:B220) D Present value AxB (90,244) 12,870 11,917 11,034 10,217 9,460 8,759 8,111 7,510 6,953 6,438 5,961 5,520 215 219 221 222 IRR 11.00% 223 224 Net present value $ 14,507.48

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