Ans a) $ 9246.04
Year | Project Cash Flows (i) | DF@ 7% | DF@ 7% (ii) | PV of Project ( (i) * (ii) ) |
0 | -51114 | 1 | 1 | (51,114.00) |
1 | 11200 | 1/((1+7%)^1) | 0.935 | 10,467.29 |
2 | 11200 | 1/((1+7%)^2) | 0.873 | 9,782.51 |
3 | 11200 | 1/((1+7%)^3) | 0.816 | 9,142.54 |
4 | 11200 | 1/((1+7%)^4) | 0.763 | 8,544.43 |
5 | 11200 | 1/((1+7%)^5) | 0.713 | 7,985.45 |
6 | 11200 | 1/((1+7%)^6) | 0.666 | 7,463.03 |
7 | 11200 | 1/((1+7%)^7) | 0.623 | 6,974.80 |
NPV | 9,246.04 | |||
Ans b) 12.00%
Year | Project Cash Flows (i) | DF@ 7% | DF@ 7% (ii) | PV of Project ( (i) * (ii) ) | DF@ 17% (iii) | PV of Project ( (i) * (iii) ) |
0 | -51114 | 1 | 1 | (51,114.00) | 1 | (51,114.00) |
1 | 11200 | 1/((1+7%)^1) | 0.935 | 10,467.29 | 0.855 | 9,572.65 |
2 | 11200 | 1/((1+7%)^2) | 0.873 | 9,782.51 | 0.731 | 8,181.75 |
3 | 11200 | 1/((1+7%)^3) | 0.816 | 9,142.54 | 0.624 | 6,992.95 |
4 | 11200 | 1/((1+7%)^4) | 0.763 | 8,544.43 | 0.534 | 5,976.88 |
5 | 11200 | 1/((1+7%)^5) | 0.713 | 7,985.45 | 0.456 | 5,108.44 |
6 | 11200 | 1/((1+7%)^6) | 0.666 | 7,463.03 | 0.390 | 4,366.19 |
7 | 11200 | 1/((1+7%)^7) | 0.623 | 6,974.80 | 0.333 | 3,731.79 |
NPV | 9,246.04 | NPV | (7,183.34) | |||
IRR = | Ra + NPVa / (NPVa - NPVb) * (Rb - Ra) | |||||
7% + 9246.04 / (9246.04 + 7183.34 )*10% | ||||||
12.00% |
A project that provides annual cash flows of $11,200 for 7 years costs $51,114 today. a....
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