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NPV and IRR

A project has the following cash flows:

Year Cash Flow

0 $65,200
1 -31,200
2 -49,100

Required:

(a)What is the IRR for this project? (Do not include the percent sign (%). Round your answer to 2 decimal places, e.g. 32.16.)

IRR ___?____ percent

(b)

(i)What is the NPV of this project, if the required return is 10 percent? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places, e.g. 32.16.)

NPV $__?___

(ii)Should the firm accept the project?
Yes? ______
or
No? ______

(c)What is the NPV of the project if the required return is 0 and 20 percent? (Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places, e.g. 32.16.)

NPV at 0 percent $ ____?____

NPV at 20 percent $ ____?____

Solution Preview

Please see attached file

A project has the following cash flows:

Year       Cash Flow

0          $65,200
1          -31,200
2          -49,100

Required:

(a)What is the IRR for this project? (Do not include the percent sign (%). Round your answer to 2 decimal places, e.g. 32.16.)

IRR _13.94__ percent

IRR (Internal Rate of Return)

IRR (Internal rate of return) is calculated using Excel function IRR

Year Cash flow

0 $65,200
1 ($31,200)
2 ($49,100)
IRR= 13.94%

We can check whether the answer is correct by discounting the cash flow at IRR rate, NPV then should be zero

Year Cash flow Discount ...

Solution Summary

Calculates NPV and IRR of projects.

$2.19