The Internal rate of return (IRR) is the discount rate for which the net present value (NPV) is zero. | |||||||||||||||||||||
Using the IRR we can calculate the initial investment of the project. | |||||||||||||||||||||
IRR | 0.1031 | ||||||||||||||||||||
Initial investment | 49637.58 | ||||||||||||||||||||
Present Value = Future value/ ((1+r)^t) | |||||||||||||||||||||
where r is the interest rate that is 9% and t is the year | |||||||||||||||||||||
NPV = Initial investment + sum of present values of future cash flows | |||||||||||||||||||||
WACC/r | 0.09 | ||||||||||||||||||||
Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 |
cash flow | -49637.58 | 5000 | 5000 | 5000 | 5000 | 5000 | 5000 | 5000 | 5000 | 5000 | 5000 | 8500 | 8500 | 8500 | 8500 | 8500 | 8500 | 8500 | 8500 | 8500 | 8500 |
Present value using IRR | 4532.68 | 4109.04 | 3724.99 | 3376.84 | 3061.23 | 2775.11 | 2515.74 | 2280.61 | 2067.45 | 1874.22 | 2888.39 | 2618.43 | 2373.70 | 2151.84 | 1950.72 | 1768.40 | 1603.12 | 1453.29 | 1317.46 | 1194.32 | |
Present value using WACC | 4587.156 | 4208.4 | 3860.917 | 3542.126 | 3249.657 | 2981.337 | 2735.171 | 2509.331 | 2302.139 | 2112.054 | 3294.029 | 3022.045 | 2772.518 | 2543.595 | 2333.573 | 2140.893 | 1964.122 | 1801.947 | 1653.162 | 1516.663 | |
NPV | 5493.26 | ||||||||||||||||||||
The net present value of the project is $5493.3 |
Click here to read the eBook: Net Present Value (NPV) Click here to read the eBook:...
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Attempts: Keep the Highest: /1 1. Problem 11.01 Click here to read the eBook: Net Present Value (NPV) NPV Project L costs $35,000, its expected cash inflows are $15,000 per year for 10 years, and its WACC is 14%. What is the project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. Grade It Now Save & Continue Continue without saving
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complete this right please
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