Explore BrainMass

Explore BrainMass

    NPV and IRR

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

    1. ABC plc is evaluating project A on which it has recently spent £6000 on R&D, which is irrecoverable. Moreover, the company auditor proposes to charge a contribution to sales force overheads of £3,000 to the project. Unfortunately, for the project to proceed, ABC needs to spend an additional £10000, which can be written down entirely after one year. The cash inflows from the end of year 1 onwards are:

    End of Year Cash Flows £
    1 1250
    2 6250
    3 9766

    There is nil scrap value on the asset at the end of the 3rd year. The discount rate for the project is 15% p.a. Ignore taxation. The planning department uses two measures to assess projects: NPV and IRR. Calculate both.

    © BrainMass Inc. brainmass.com June 3, 2020, 6:36 pm ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/npv-irr-67101

    Attachments

    Solution Summary

    The expert calculates NPV and IRR of a project

    $2.19

    ADVERTISEMENT