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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

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