Homework Answers
| NPV | 24266.75 |
| IRR | 12.30% |
Using NPV analysis, the investment should be made since NPV is positive. The project IRR is 12.3%. This is greater than the cost of 10.5% and hence the investment should be made as per IRR rule also.
WORKINGS
| Year | Cash flows |
| 0 | -120000 |
| 1 | 21500 |
| 2 | 21500 |
| 3 | 21500 |
| 4 | 21500 |
| 5 | 21500 |
| 6 | 21500 |
| 7 | 21500 |
| 8 | 21500 |
| 9 | 21500 |
| 10 | 21500 |
| NPV | 24266.75 |
| IRR | 12.30% |
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