Explore BrainMass

Explore BrainMass

    NPV and IRR

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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 $ ____?____

    © BrainMass Inc. brainmass.com June 3, 2020, 9:59 pm ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/npv-and-irr-208763

    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

    ADVERTISEMENT