Calculation of NPV | ||||||||
10.00% | ||||||||
Year | Annual Cash flow | PV factor | Present values | |||||
0 | $ (38,000,000) | 1.0000 | $ (38,000,000) | |||||
1 | $ 56,000,000 | 0.9091 | $ 50,909,091 | |||||
2 | $ (9,000,000) | 0.8264 | $ (7,438,017) | |||||
Net Present Value | $ 5,471,074 | |||||||
Calculation of IRR | ||||||||
29.00% | 30.00% | |||||||
Year | Total cash flow | PV factor @ 29% | Present values | PV factor @ 30% | Present values | |||
0 | $ (38,000,000) | 1.000 | $ (38,000,000) | 1.000 | $ (38,000,000) | |||
1 | $ 56,000,000 | 0.775 | $ 43,410,853 | 0.769 | $ 43,076,923 | |||
2 | $ (9,000,000) | 0.601 | $ (5,408,329) | 0.592 | $ (5,325,444) | |||
$ 2,524 | $ (248,521) | |||||||
IRR | =Lower rate + Difference in rates*(NPV at lower rate)/(Lower rate NPV-Higher rate NPV) | |||||||
IRR | '=29%+ (30%-29%)*(2523.88/(2523.88-(-248520) | |||||||
29.010% |
Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year Cash Flow -$38,0...
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