Question

Consider the following cash flows: CA co 45 G +$41 C2 +$41 C3 +$41 a. Which two of the following rates are the IRRs of this project? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) 2 2.5% 34.2% 14.3% 2 34.2% 40.0% b,c &d. What is project NPV If the discount rates are 4%, 21%, 41%? (Negative amount should be indicated by a minus sign. Do not round Intermediate calculations and round your final answer to 3 decimal places.) NPV Discount Rate 4% 21% 4196

Answer 1

IRR is the rate at which the Net present value of cashflows will be ZERO. Using trial and error method IRR is computed as below:- Computation of IRR :- Cash PVF Present Year flows $ @34.20% Value $ (45) 1.0000 -45.00 0.7452 30.55 41 0.5553 22.77 0.4138 16.96 (82) 0.3083 -25.28 Net Present Value -0.00 41 41 IRR is 34.20% PVF @21.00% 1.0000 Computation of Net Present Value - Cash PVF Present Year flows $ @4.00% Value $ (45) 1.0000 -45.00 41 0.9615 39.42 41 0.9246 37.91 0.8890 36.45 (82) 0.8548 -70.09 NPV - 1.32 0.8264 Present Value $ -45.00 33.88 28.00 23.14 -38.25 1.78 PVF @41% 1.0000 0.7092 0.5030 0.3567 0.2530 NPV Present Value $ 45.00 24.03 14.09 8.26 -9.68 -8.31 41 0.6830 0.5645 0.4665 NPV NPV at 4% is $ -1.32 NPV at 21% is $ 1.78 NPV at 41% is $ -8.31