Question

AGE MINDTAP Q Search this col 1 Homework - Graded nment: Chapter 11 Homework - Graded Assignment Score: 60.00% Save Submit Assignment for Grading ons 4 Question 9 of 10 Check My Work eBook A project has annual cash flows of $3,500 for the next 10 years and then $8,000 each year for the following 10 years. The IRR of this 20-year project is 11.99%. If the firm's WACC is 10%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent. Check My Work 0-Icon Key Question 9 of 10 6.01

Answer 1

NPV

$6,101.35

First we compute the initial cost as PV of cash inflows at the IRR which is 34,356.61. Then we compute the NPV using 10% rate.

Year	Initial cost	Cash Inflows	Net cash flows
0	($34,356.61)		($34,356.61)
1		3500	$3,500.00
2		3500	$3,500.00
3		3500	$3,500.00
4		3500	$3,500.00
5		3500	$3,500.00
6		3500	$3,500.00
7		3500	$3,500.00
8		3500	$3,500.00
9		3500	$3,500.00
10		3500	$3,500.00
11		8000	$8,000.00
12		8000	$8,000.00
13		8000	$8,000.00
14		8000	$8,000.00
15		8000	$8,000.00
16		8000	$8,000.00
17		8000	$8,000.00
18		8000	$8,000.00
19		8000	$8,000.00
20		8000	$8,000.00

Workings

AutoSave of H D Book1 - Excel Sign in - 0 X Comments File Home Insert Draw Page Layout Formulas Data Review View Help Tell me what you want to do Share 47 - 9 = = 1 Calibri BIU - B E- A A = C9-A- E Insert - E Delete - Format alben 3- to Paste General $ -% Number en . Conditional Format as Formatting Table - Styles Cell Styles Sort & Find & Filter - Select Editing Clipboard Font Alignment Cells B1 - X V for Year F G H Year Cash Inflows Initial cost =-NPV(11.99%,D3:D22) NPV =NPV(10%,E3:E22) E2 3500 3500 3500 3500 3500 3500 3500 3500 3500 3500 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 Net cash flows =C2D2 =C3D3 =C1D11 =C5+D5 =C6+D6 =C7407 =C8+D8 =C9+D9 C10+D10 C11+D11 C12+D12 =C13+D13 =C14+D14 =C15+015 =C16+D16 =C17+D17 =C18+D18 =C194D19 =C20 D20 =C21+D21 =C22+D22 Sheet1 Shee 19 Ready # EE - - + 100% ^ J ENG 4:58 AM