Question

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.

Answer 1

present value of cash inflows at 13.66% discount rate At IRR, npv 0 NPV

Calculation of initial investment: | | cash flows | pv @ 13.66% Present value cash flows v @ 12% Present value $41,856.11 $4,464.29 $3,985.97 $3,558.90 $3,177.59 $2,837.13 $2,533.16 $2,261.75 $2,019.42 $1,803.05 $1,609.87 $3,018.50 $2,695.09 $2,406.33 $2,148.51 $1,918.31 $1,712.78 $1,529.27 $1,365.42 $1,219.12 $1,088.50 year ear $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $10,500.00 $10,500.00 $10,500.00 $10,500.00 $10,500.00 $10,500.00 $10,500.00 $10,500.00 $10,500.00 $10,500.00 0.87982$4,399.08 $3,870.39 0.68105$3,405.23 0.59920$2,995.98 $2,635.92 2$2,319.12 0.40808$2,040.4:1 0.35904 $1,795.18 0.31589$1,579.43 2$1,389.61 2$2,567.47 0.21513$2,258.90 0.18928$1,987.42 0.16653 $1,748.57 $1,538.42 1$1,353.53 1$1,190.86 0.09978$1,047.74 $921.82 $811.03 0.8929 0.7972 0.7118 0.6355 0.5674 0.77408 0.52718 0.46382 0.4523 0.4039 0.3606 0.27792 0.24452 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 0.2875 0.2567 0.2292 0.14652 0.12891 0.11341 0.1827 0.1631 0.1456 0.1300 0.1161 0.1037 net present value [ NPV] $5,496.82 0.08779 0.07724 Initial investment $41,856.11