Question

A project has annual cash flows of $6,500 for the next 10 years and then $5,000 each year for the following 10 years. The IRR of this 20-year project is 9.2%. If the firm's WACC is 8%, what is the project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

Answer 1

Solution :

The Project's NPV = $ 4,613.94

= $ 4,613.9 ( when rounded off to the nearest cent )

We know at IRR of 9.2 % , NPV = 0

This implies that the Present value of cash flows discounted at IRR of 9.2 % – Initial Investment = 0

Thus Present value of cash inflows discounted at IRR of 9.2 % = Initial Investment

Thus Initial Investment = $ 54,541.91

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.