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    INTERNAL RATE RETURNS & NPV

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    NPV and IRR Aproject thatcosts $3,000 to install will provide annual cash flows of $800 for each of the next 6 years. Is this project worth pursuing, if the discount rate is 10 percent? How high can the discount rate be before you would reject the project?

    The answer is below:
    YEAR CASH FLOW DISCOUNT FACTOR@10% DISCOUNTED CAS FLOW

    0 (3,000) 1 -3,000=3000*1
    1 800 0.909091 727=800*1
    2 800 0.826446 661=600*0.826446
    3 800 0.751315 601=800*0.751315
    4 800 0.683013 546=800*0.683013
    5 800 0.620921 497=800*0.620921
    6 800 0.564474 452=800*0.564474

    NPV= 484

    © BrainMass Inc. brainmass.com June 3, 2020, 5:37 pm ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/internal-rate-returns-npv-32776

    Solution Preview

    The formula of computing Present Value is:
    PV = CF / (1+r)^n
    where CF is the cash flow,
    r is discount rate,
    n is number of years
    "^" is "to the ...

    Solution Summary

    INTERNAL RATE RETURNS & NPV are determined.

    $2.19

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